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How to Invest In Mutual Funds: 101

You can easily invest in mutual funds by visiting a branch of your chosen mutual fund company with necessary documents.

Anshika Bajpai |

Updated:March 28, 2019, 12:47 PM IST
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How to Invest In Mutual Funds: 101
Image for representation only.

So we all know what Mutual Funds are and how many kinds of Mutual Funds exist, but we still don’t invest in them. Why? Because most of us don’t even know how to invest and where to start when it comes to mutual funds. Worry not! Here’s a brief step by step process on how to start investing in Mutual Funds like a pro.

Step 1 - First and foremost, analyze your risk capacity and risk tolerance. Sometimes plans that offer high returns have a higher amount of risk. If you are in a position to tolerate high risks, then invest in equity schemes that offer a high return. However, if you don’t want to risk your investment and are okay with moderate returns then go for debt schemes.

Step 2 - Allocate your assets. It is a process of deciding how to spread your investable money in different asset categories (equity mutual funds, debt mutual funds and cash). This will help you minimise risk and maximise returns. The reason why it reduces your risk is because all these are from different categories and hence respond differently to the market at a given point of time. So if one is not doing well the other might give you profits.

Step 3 - Identify the funds that you want to invest in each asset class. Do compare the mutual funds according to your investment objective and its past performance.

Step 4 - Finally, decide on the mutual fund that best suits you and want to invest in. For that, you will have to register your application online or offline.

Step 5 - The last step is to diversify your investments and keeping a track on all of them.

Other than these basic steps there are a few prerequisites that you should follow before investing in mutual funds. Here are a few;

● Having a bank account is mandatory to invest in mutual funds.

● To invest in mutual funds, you must fulfil the KYC requirements. You need to submit copies of your PAN card, proof of residence, age proof and other such documents asked by the mutual fund company.

● Most mutual fund companies will also ask for a physical or online copy of a cancelled cheque leaf which has the IFSC and MICR (Magnetic Ink Character Recognition) of your bank. So keep that handy too.

Now that you know what all you need, here are a few ways you can invest in mutual funds.

Direct offline investment - You can easily invest in mutual funds by visiting a branch of your chosen mutual fund company. Make sure you carry a copy of the following documents.

Address proof

Identity proof

Cancelled cheque

Passport size photos

Offline investment through a broker - A mutual fund broker helps you through the entire process of mutual fund investment. He will give you all the information you need for investing, he will tell you about the features of each mutual fund, what all documents you’ll need and will guide you on which mutual fund you should invest in. For all these services he will charge a fee too.

Online investment (website) - Most of the mutual fund companies let you invest in their plans through their official website. All you have to do is read all the instructions carefully and fill in all the necessary information. You can even complete your KYC online by entering your Aadhar and PAN number. Once your verification is done from the backend you can easily start investing in Mutual Funds.

Online investment (app) - You can even invest in mutual funds on the go through a mobile app. Other than investing in mutual funds, apps also let you buy or sell units, view account statements and other details.

So here’s everything you needed to know about how to invest in mutual funds. It’s always better to start as soon as you can to make your money grow and get the most of your resources.

To know more, click here.

This content has been created in association with YONO SBI.

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