07 OCTOBER, 2019

A large number of new investors, in the age bracket of 25-30, now prefer starting their investment journey through mutual funds. There are funds for every type of investor, and the learning curve is not as steep as trying to understand other investment options such as the stock market. But as with most things in life, your first step in the world of mutual funds is very crucial.

So, how are you planning to begin your investment journey?

These tips can definitely help

  • Understand Different Types of Funds
    There are three major types of funds; equity funds, debt funds, and hybrid funds. Understand how these funds work, the risk they carry, and their returns potential. For instance, while equity funds are known for their high returns potential, they also carry a higher level of risk as compared to debt fund and hybrid funds. Many new investors make the mistake of only building a portfolio of equity-based funds due to their higher earning potential.. Make sure you work towards a well-balanced portfolio by including both equity and debt instruments right from the start.
    When you are just starting out, SIPs may be just the right way, especially for equity-based mutual funds. They help you plan your finances better, make you a disciplined investor and, best of all, they let you take advantage of RCA (Rupee Cost Averaging).

  • Know How SIPs Work
    SIP or Systematic Investment Plan is an investment strategy that allows you to invest as little as Rs. 1000/month in a mutual fund of your choice. This eliminates the need for you to invest a lump sum amount, enabling you to start investing sooner in life.
    When you are just starting out, SIPs may be just the right way, especially for equity-based mutual funds. They help you plan your finances better, make you a disciplined investor and, best of all, they let you take advantage of RCA (Rupee Cost Averaging).

  • Selecting a Fund for SIP
    The market volatility often makes a lot of new equity fund investors stop their SIP or not start one. But as mentioned above, the very nature of SIP is as such that it helps you buy more units when the market is falling. So, SIP is considered an excellent way to ride through challenging market conditions.
    For starting a SIP, look for a reputable fund house, a fund with high AUM (Asset Under Management), experienced fund manager, and decent if not super impressive past returns. Make sure you check returns of at least past 4-5 years when evaluating any equity funds.

  • Consider Professional Help When Required
    While you can start investing in mutual funds within minutes, professional assistance ensures that your investment actually helps you get closer to your goals.
    Look for reliable financial advisors that offer unbiased recommendations based on your custom requirements.

  • Goal-based Investing
    The importance of goal-based investing can’t be stressed on enough, especially when you are just starting out your investment journey.
    Make sure you invest for goals such as education, car, home, etc. You can take help of some tools that let you know the exact SIP amount you need to achieve the goal.


The Right Way to Invest in Mutual Funds
To sum it up, work towards building a well-diversified portfolio keeping an end-goal in mind. Start with SIPs, and take help from a professional advisor before you gain some experience. Lastly, and most importantly, mutual funds are long-term investments, and thus periodical volatilities in the markets, should not deter you from the financial goal. However, it is important to monitor your investments regularly with your advisor and take course-correction steps if the need be.

 

Disclaimer:Mutual fund investments are subject to market risks, read all scheme related documents carefully. 

 

 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.