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mutual funds selection

“Key Considerations for New Mutual Fund Investors”

As a first-time mutual fund investor, there are a few important things to consider before making your first investment. Here are five key questions answered to help guide your decision-making process.

  1. How much should I invest?  Identify your goals first and this will help you decide the amount you need to invest to achieve each goal.

  2. Should I invest in equity or debt schemes? This depends on your investment objective, investment horizon and risk profile. If you are investing to achieve a short-term goal that needs to be achieved in a couple of years, debt schemes may be a safer choice. However, if you have a long-term financial goal that needs to be met after five years or so, equity mutual fund schemes may offer superior returns over other asset classes.

  3. What is the minimum amount required to start investing in mutual funds? You can start with as low as Rs 100 per month, the mantra is to “start and stay invested for long term”.

  4. If I start with Rs 100 per month, can I keep adding as my income increases? Yes, you can make additional purchases in the same fund.

  5. Is Systematic Investment Plan the only way or I can invest in lumpsum too? Both methods have their own benefits, A lumpsum investment gives more time to investment and results in higher returns as the power of compounding increases with time. An SIP (the pre-determined amount invested at a regular interval) gives you the benefit of Rupee Cost Averaging, which helps balance out market volatility in the long term.

One important piece of advice for new investors is to seek the help of a mutual fund advisor for smooth onboarding, expert opinion, and careful scheme selection.

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