How ToInvest in Mutual Fund?

The process

Decide Your Investment Objectives

Shortlist Funds

Analyze & Compare Shortlisted Funds

Don’t Pick Just One

Change Tracks Whenever Necessary

Decide Your Investment Objectives

Before you set out to invest money, it is important to take a step back and understand exactly why you are saving up. Your age and

stage of life will also play an important role in deciding your investment objectives. Decide

what you want your money to do for you and then proceed.

Shortlist Funds That Match Your Objectives

The team that manages a mutual fund picks the assets into which investors’ money will be put

based on clearly defined investment objectives. There are many kinds of mutual

funds based on these investment objectives –rapid growth, retirement benefits, regular

returns and so on.

The four fundamental objectives that guide

most funds are:

• Growth

• Fixed Income

• Balance of growth and income

• Quick Turnover of Funds

Analyze & Compare Shortlisted Funds

Look for the prospectus or quarterly reports of the shortlisted funds and analyze their

performance. Also compare their performance against that of other funds with similar

objectives and benchmark indices. Go for established funds with a proven track record.

Investing in a mutual fund is not like putting money in a bank account.

There are certain fees that are attached to the investment you make that will be deducted by

the Asset Management Company (AMC).

These fees can sometimes add up to be quite significant and eat away into whatever returns

you might make on your investments.

These fees include entry load, exit load, annual expenses, management fees and so on.

Don’t Pick Just One

Once you are done with your analysis, don’t jump onto the best fund as per your reckoning

and park all your money with just one fund. Spread your risks by splitting your investment

and putting in smaller sums in two or three different funds that figured on the top of your

list after all the filtering and analysis.

Change Tracks Whenever Necessary

Unlike fixed income instruments like bank FDs, mutual fund investments are subjected to the

same market forces that affect equities, derivatives, and other forms of securities.

However, the level of scrutiny need not be as close as you would have for individual stock

purchases for the simple reason that a mutual fund is a professionally managed investment.

Qualified stock market analysts and fund managers who track every small move in the markets

manage your funds as a full-time job.

Having said that, you can’t simply wash your hands off your mutual fund investments once you buy them either. With fund performances moving in tandem with the stock market’s movements, it becomes imperative that you keep an eye on

what is happening to your investment on at least a quarterly basis.

A financially aware and empowered India.