Simple Guide to Your Mutual Fund Investment Journey

Simple Guide to Your Mutual Fund Investment Journey

Mutual Fund Investment guide

Mutual funds are a type of investment that removes the risk associated with investment management from the individual investor by facilitating easy access, liquidity, and straightforward exits. Investors can purchase “units” of mutual funds, which essentially represent their ownership stake in a particular online mutual fund investment. At the fund’s current net asset value (NAV), these units can be bought or redeemed as needed. According to the holdings of the fund, these NAVs are constantly changing. Therefore, the gain or loss of the fund is shared proportionally by each investor.

Mutual funds are not the most popular investment vehicle for the vast majority of Indian investors because they are either unaware of them or find them to be too complex to understand, despite their simplicity and suitability for small investors.

Here is a short guide to get you started with your mutual fund investment journey if you’re thinking about investing in them:

What is a mutual fund investment?

A mutual fund is a professionally managed investment vehicle that pools money from different investors to make stock market investments in an effort to maximise returns. Mutual fund investments carry less risk compared to direct stock market investments because they are professionally managed by knowledgeable fund managers. As a result, it’s a great investment for those who lack the knowledge and time to make direct investments.

Mutual funds are managed by trustworthy financial experts who specialise in analysing and managing investments. These individuals are referred to as fund managers. According to the investment objective of the mutual fund, the money raised from investors is invested by the fund managers in a variety of financial assets, such as stocks, bonds, and other assets. The fund managers, among many other duties, are in charge of where and when to invest.

What are the different types of mutual funds?

Mutual funds can be broadly divided into three types:

Equity Funds
Equity mutual funds invest primarily in stocks or company shares. By taking advantage of market changes, they hope to achieve high returns. In other words, mutual fund investors profit when the share price increases. Equity mutual funds typically offer higher returns than other types of funds, but there is also a higher risk of loss. Therefore, equity funds are appropriate for investors who want to stay invested for a long time and have a high-risk tolerance.

Debt Investment Funds
Debt mutual funds invest primarily in treasury bills and other fixed-income securities like corporate bonds. It provides consistent returns and carries lower risk than equity mutual funds. Therefore, risk-averse investors looking to make short-term investments should consider debt funds.

Balanced and hybrid funds
Equities and debt funds are both investments in balanced or hybrid mutual funds. In order to maximise profits, this special combination helps to keep a balance between risk and returns. Investors with a low tolerance for risk should choose this type of mutual fund.

How to invest in mutual funds?

Through fund houses, banks, or agents, you can invest in mutual funds. With online mutual fund investment, buying mutual funds is an easy and quick process. Simply download the KYC form, fill it out, and submit it. You also have the choice to use Systematic Investment Plans, or SIPs, to invest in a selection of mutual funds from renowned fund houses in India.

You must register and set up an account on the website for online mutual fund investment. then take the subsequent actions. However, there is a sizable obstruction in the way.

Most likely, you will find the plans of various fund houses to be appealing. Each fund house requires that you register before you can invest in them. And that might be very troublesome. It would be difficult to monitor and analyse your investments as well.

Utilising a mutual fund distributor is the second option for investing. But this approach isn’t economical. Your returns will be lower because you’ll have to pay a higher expense ratio.

Tips to maximise your mutual fund returns

SIP investments
SIPs promote disciplined, regular investing while not placing a burden on your finances. You can start investing in mutual funds through SIPs with as little as Rs 500 per month. Additionally, it does away with the need for market timing and, with the help of compounding, enables you to earn higher returns. Use this SIP calculator to easily plan your systematic investment plan right away!

Periodically review your finances
A regular evaluation of your funds’ performance based on your shifting financial needs and risk tolerance is a good practice. This will guarantee that your investments continue to be active in accordance with market conditions, helping you ultimately to realise a good return on your investment.

Be prepared to take chances
Don’t be hesitant to select riskier funds, such as equity, if you intend to invest for the long term. Despite their inherent volatility, equity funds produce higher returns over the long term. Mid-cap funds, which have a tendency to rise more than broader indices, are more prudent choices for investments lasting 5 to 10 years. Additionally, you can maximise the “rupee cost averaging” benefit by investing in equity through SIPs.

Make long-term investments
Particularly if you invest in stocks, mutual funds are an excellent long-term saving tool. You will undoubtedly be dissatisfied with the returns if you believe you can secure excellent returns by betting on a short-term market wave. As a result, be sure to hold onto your investments for at least 3-5 years.


Indian investors can grow their investments more quickly than with traditional investment instruments thanks to mutual fund investment, which is a tried-and-true, dependable method of doing so. They have the potential to provide greater returns, capital growth, and income generation. They also act as an inflation hedge and allow for the creation of funds to support a variety of long- and short-term needs. To achieve greater returns than those provided by traditional investments, mutual fund investing is done. The increased returns are primarily the result of expert fund management and greater market exposure. The Systematic Investment Plan (SIP) route makes this accessible for small initial capital investments. Therefore, it is a wise idea.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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