Today many people are investing in mutual funds as the profit is very evident. But many also refrain from choosing this method of investment as the process is quite complicated. Here are some tips for beginners about how to invest in direct mutual funds.
How do mutual funds work?
The mutual funds trade only once on a particular day after all the markets shut down. The value of a share in mutual funds depends on the Net Asset Value (NAV) of the stock.
Before investing any significant amount in mutual funds, it is imperative to understand a few things. At first, one needs to study the market before investing in mutual funds. Mutual funds are subjected to market risks; therefore, understanding the risk is very important.
If you can manage to take the risk, then you can invest a more significant amount of money to get more return. But if you want to avoid making the risk, then you should go for those funds that are sure to give good returns.
There are many aggressive funds whose value can go high on one day, and the next day, it can see a steep downfall; you should avoid them and know how to invest in direct mutual funds. Instead, invest in those funds that yield a steady profit throughout.
Types of mutual funds to invest in
There are many schemes of investment in mutual funds. If you can dare to take the risk, then you can start with equity-related mutual funds. They can give you a very high return, but also you can face a functional loss at the same time.
Then there are debt-related mutual funds that are safe as they are invested in government securities. You can also go for investing little in equity and short in debt with how to invest in direct mutual funds.
The advantages of investing in mutual funds:
- You can start your investment with a very minimum amount of rupees 500.
- You can disperse the investment in more than one stock and also in other forms like debt, gold, etc.
- You can start an automated venture that will be deducted every month from your bank account.
- You can invest without opening any DMAT account.
- You can earn a good profit if you can make a long-term investment.
- Mutual funds are less risky than share trading.
- There are tax-saving mutual funds.
These are some of the handy tips that can help any beginner to start his investment in mutual funds. Source
Hi, I’m a Financial Operations Specialist, having an experience of over 12+ years. I have worked with a major financial institution like Goldman Sachs, in their investment management division. During my term with Goldman, I’ve worked on derivatives, hedge funds, futures, etc. I also have experience in manufacturing industries in Credit Risk Analysis and Approval to the clients for prospective businesses with the parent company. I’ve got a financial degree from Vinoba Bhave University.