Investing in Mutual Funds is one of the most popular ways to grow wealth over the long-term. Mutual Funds are professionally managed investment products that pool money from multiple investors and invest it in a diverse portfolio of assets like stocks, bonds, commodities, etc. By investing in Mutual Funds, investors can benefit from the expertise of professional fund managers who make investment decisions on their behalf.
However, for beginners, Mutual Funds can seem daunting and complicated. However, with the right guidance and tools, it doesn’t have to be. In this article, we will take a look at some simple steps to get started with Mutual Funds for beginners.
Step 1: Determine Your Investment Goals and Risk Appetite
Before investing in Mutual Funds, it is essential to determine your investment goals and risk appetite. Your investment goals could be long-term wealth creation, short-term savings, retirement, or anything in-between. It is also important to assess your risk appetite. Do you prefer stable but lower returns, or are you willing to take on more risks for the potential of higher returns? These factors will help you choose the appropriate Mutual Funds to invest in.
Step 2: Choose a Suitable Mutual Fund
There are different types of Mutual Funds available, including Equity Funds, Debt Funds, Hybrid Funds, and more. Equity Funds invest predominantly in stocks and are suitable for investors with a higher risk appetite and long-term investment goals. Debt Funds invest mostly in fixed income securities like bonds and are suitable for investors with lower risk appetite and short-term investment goals. Hybrid Funds invest in both equity and debt instruments, making them suitable for investors who want a balance of safety and growth.
Once you have determined your investment goals and risk appetite, you can choose a suitable Mutual Fund accordingly. It is important to conduct research and understand the fund’s investment strategy, risk profile, and historical performance before investing.
Step 3: Invest through an App
Investing in Mutual Funds has become easier with the advent of investment apps. These apps provide a user-friendly interface, convenient account opening process, and easy investment options. They also offer features like Regular Savings Plan (RSP), which allows you to invest a fixed amount at regular intervals, and Systematic Investment Plan (SIP), which allows you to invest a fixed amount at fixed intervals.
Some prominent Investment Apps in India include:
Bajaj Finserv:
Bajaj Finserv App is a popular investment app that offers a wide range of investment options, including Mutual Funds. The app provides a user-friendly interface that makes investing in Mutual Funds easy. With this Mutual Fund Calculator App, investors can calculate the returns they would earn on their investment based on the investment amount, tenure, and interest rate.
Groww:
Groww is another popular investment app that offers an extensive range of investment products, including Mutual Funds. The app provides a simple interface that makes investing in Mutual Funds easy, providing a mutual funds calculator to understand returns beforehand. The app offers features like Regular Savings Plan (RSP) and Systematic Investment Plan (SIP).
5paisa:
5paisa is an excellent investment app that provides access to a wide range of investment options, including Mutual Funds. The app provides a user-friendly interface that makes investing in Mutual Funds easy. Investors can choose from a range of funds, including Equity Funds, Debt Funds, and Hybrid Funds. They also offer a mutual funds calculator to assess returns before investing.
Zerodha:
Zerodha is another prominent investment app that offers a wide range of investment products, including Mutual Funds. They offer features like Regular Savings Plan (RSP) and Systematic Investment Plan (SIP), which make investing in Mutual Funds easy.
Angel Broking:
Angel Broking is a brokerage firm that provides an investment app that offers a wide range of investment options, including Mutual Funds. The app provides a user-friendly interface that makes investing in Mutual Funds easy. Investors can choose from a range of funds, including Equity Funds, Debt Funds, and Hybrid Funds. They also offer a mutual funds calculator to assess returns ahead of investing.
Mutual Funds are a market-linked investment option that invests in a diversified portfolio of bonds and stocks, whereas Fixed Deposits (FD) are fixed-income investments that guarantee a fixed rate of interest for a fixed tenure. Here is a comparison of Mutual Funds vs. FDs based on different parameters.
Returns:
Returns on Mutual Funds are market-linked and not guaranteed, but they have shown to provide higher returns than FDs over the long-term. Mutual Funds offer the potential for higher returns as they invest in a diversified portfolio of stocks, bonds, and other securities that have the potential to grow in value. In contrast, FDs offer a fixed interest rate, which is generally lower than the average return on a Mutual Fund.
Risk:
FDs are low-risk investments as they offer a guaranteed return that doesn’t depend on market fluctuations. However, Mutual Funds are market-linked investments and come with higher risk. The return on investment in Mutual Funds depends on the performance of the various securities included in the fund’s portfolio.
Liquidity:
FDs have a fixed tenure, and withdrawals before maturity are subject to penalties. In contrast, Mutual Funds have higher liquidity, and investors can redeem their units at any time without incurring any penalty or charges.
Taxation:
Taxation for Mutual Funds and FDs differ. The interest received on FDs is subjected to TDS, and returns on the investment are taxable as per the investor’s income tax slab rate. On the other hand, only the capital gains earned from Mutual Funds are taxable, at the rate of 10% for investments held over one year.
While Mutual Funds offer higher returns, they come with higher risk. FDs, on the other hand, provide guaranteed returns and low risk, but offer lower returns and limited liquidity. Investors with a low-risk appetite and a short-term investment horizon might prefer FDs, while those with a higher risk appetite and a long-term investment horizon might opt for mutual funds. It is essential to evaluate your investment goals, risk appetite, and time horizon before making a decision on which investment option to choose.
Recently, our Prime Minister, Mr. Narendra Modi emphasized on the importance of Kartavya Kaal over the next 25 years. This period is poised to become a global economic powerhouse. The Kartavya Kaal for finance is a call to action for all Indians. It is a time for us to take responsibility of our financial future & build a stronger nation.
In conclusion, investing in Mutual Funds can be a great way to grow your wealth over the long-term. By following these simple steps and using investment apps like Bajaj Finserv, Groww, 5paisa, Zerodha, and Angel Broking, beginners can start investing in Mutual Funds easily. With user-friendly interfaces, Mutual Fund Calculator Apps, and investment options like Regular Savings Plan and Systematic Investment Plan, investing in Mutual Funds has never been more accessible.
