How To Invest In Mutual Funds - Mutual Investment Guide

Mutual funds have made life easy for retail investors. Gone are the days when working professionals had to wrack their brains to find the right stock or bond. There’s a mutual fund for every goal and risk profile.

But you knew that already! What you want to know is how to buy mutual funds with ease. There are many ways to invest in mutual funds. We’ll help you understand the most convenient ones.  

How To Invest In Mutual Funds?

Mutual funds have exploded in popularity in part due to the rise of investment platforms like Cube. These platforms have made mutual funds accessible to anyone who owns a smartphone.  

At the same time, the cost of investing in mutual funds has also gone down. Interested investors can start with as low as ₹1000 while sitting in the comfort of their homes. 

Investment apps are thus one of the most convenient ways to invest in mutual funds online. You could also buy mutual funds online through the website of an Asset Management Company (AMC).

Old fashioned ways of investing in mutual funds still exist. There are plenty of AMCs that have offline locations where you can invest in mutual funds. But you’ll have to travel to visit the branch.

Not to forget the (confusing) physical forms that you’ll have to fill out. Overall, the offline method is a cumbersome way to invest in mutual funds. That’s why we’ll focus only on the online method. You can consult a Cube Wealth coach or download the Cube Wealth App.

Steps To Invest In Mutual Funds Online

Let’s start with investment apps and then move on to AMC websites. But before we do, note that it is important to invest in mutual funds based on your financial goals and risk profile.

These caveats apply to any online or offline mutual fund investment. Once you’ve narrowed down your mutual fund choices, the rest is as easy as pie. 

1. How To Buy Mutual Funds Using Investment Apps

• Step #1: Select a solid investment app
• Step #2: Download the investment app
• Step #3: Complete the KYC process
• Step #4: Narrow down suitable mutual funds
• Step #5: Start investing

2. How To Buy Mutual Funds Using Investment Apps

• Step #1: Identify the mutual fund you want to buy
• Step #2: Visit the mutual fund AMC’s website
• Step #3: Register & complete the KYC process
• Step #4: Select direct or regular plan
• Step #5: Start investing

That’s it! 

Here are some things that nobody will tell you about investing in mutual funds. If you’re a first-time mutual fund investor, you’ll have to go through BSE StAR’s verification process.

This will be independent of the investment app or AMC’s KYC process. Most apps and websites allow you to invest via net banking or UPI. Finally, it takes 2-3 business days to process a mutual fund investment.

How Do Mutual Fund Investments Work?

Imagine you and hundreds of others pitching in money to buy various assets. You soon learn that the process of buying and selling is complex, so you let an expert do it for you. 

That’s what mutual funds are in a nutshell. A pool of money managed experts who buy stocks, bonds, and other assets to make your money grow. Expert management means that you can save time and effort. 

Mutual funds come in various forms, each suitable for different risk profiles and financial goals. This is how mutual funds are generally categorized:

• Equity funds: invest in stocks and related securities
• Debt funds: invest in debt securities like bonds, treasury bills, and others
• ELSS funds: invest in stocks and related securities but help save tax of up to ₹46,800 with a lock-in of three years
• International funds: invest in stocks of foreign companies from countries like China, Japan, UK, USA, and others

These categories are known to generate 4-16% returns in the long term. Now that you’ve got a refresher on how mutual funds work, let’s explore why you should invest in mutual funds in India. You can consult a Cube Wealth coach or download the Cube Wealth App.

5 Reasons To Invest In Mutual Funds

The mutual fund industry in India has grown by leaps and bounds over the past financial year. More and more people are investing in mutual funds due to the factors mentioned below. 

1. Low Stress

Stock picking can be very stressful, especially for working professionals who hustle for long hours every day. Mutual funds solve this problem by taking the burden of choice away from you.

What you get in a mutual fund is a basket of securities in one place, a feat that would otherwise take days or years otherwise. That said, you still have to pick the right mutual funds.

Watch this video to know why you should let experts do this for you.

2. Professional Management

An expert fund manager and a team of analysts decide which stock or bond to buy and sell. These are professionals who’ve been in the game for years and know a thing or two about markets. 

This means that by investing in mutual funds, you save time, effort, and money that would otherwise be spent while understanding and exploring the markets on your own.  

3. Diverse Options

“Mutual fund” is an umbrella term used to describe a basket of different types of securities. Each basket varies in the degree of risk it carries. Some baskets have stocks, some have bonds, and others have both.

You as an investor get to decide the level of risk you want to take based on your profile and goals. Bear in mind that the risk often mirrors the returns. Low risk = low returns, high = potentially high returns.

4. Lucrative Returns

For an asset to become popular, it needs to have a mix of safety and lucrative returns. That’s why investing in mutual funds has become a popular wealth creation avenue. They tick both boxes. 

Equity funds are known to generate the highest returns by far of any mutual fund. The reason is simple - they invest in stocks that have the potential to become multi-baggers or generate handsome returns. 

Debt funds, on the other hand, invest in fixed interest investments like bonds. That’s why they generate predictable returns. Either way, mutual funds can generate 4-16% returns in 5+ years. 

5. Solid Track Record 

Data of all the AMCs in India revealed that 3 crore+ new portfolios were added to the industry in FY2022. This represents a remarkable increase in the overall number of mutual fund portfolios to 12 crores+.

The rapid growth is down to the track record of AMCs. For example, SBI and HDFC have mutual funds that have existed since the mid to late 1990s. But did you know? You can consult a Cube Wealth coach or download the Cube Wealth App.

An AMC’s track record is just one of the criteria that Cube’s wealth advisor uses to curate mutual funds. Watch this video to know more.

FAQs 

1. What are the different types of mutual funds available for investment?

Ans. Mutual funds come in various types, including equity funds, debt funds, hybrid funds, and specialty funds like sector-specific or thematic funds. Each type has its unique characteristics and risk profiles.

2. What is a Systematic Investment Plan (SIP), and how does it work?

Ans. A SIP is a way to invest a fixed amount regularly in a mutual fund. It involves investing at predefined intervals (e.g., monthly) to benefit from rupee cost averaging and compounding over time.

3. Is it advisable to consult a financial advisor when investing in mutual funds?

Ans. Seeking advice from a financial advisor is recommended, especially if you're new to mutual fund investing. An advisor can help you make informed decisions, choose the right funds, and create a diversified portfolio aligned with your goals.

4. How can I create a diversified portfolio using mutual funds?

Ans. Diversification can be achieved by investing in a mix of mutual funds representing different asset classes, such as equity, debt, and hybrid funds.

Conclusion

While investing in mutual funds is accessible to a wide range of budgets, seeking advice from a financial advisor can provide valuable guidance for selecting the right funds and creating a diversified portfolio tailored to your needs.

The flexibility, diversity, and potential for growth that mutual funds offer make them a valuable tool for individuals seeking to grow their wealth, save for specific goals, and achieve financial security. By following the steps outlined in this guide and staying informed, you can make the most of mutual fund investments in your financial journey.

Note: Facts & figures are true as of 04-05-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in assets like stocks, mutual funds, alternative investments, and others.

Other Posts You May Like: