- by RingMoney
- 3 min read
Mutual funds are not just a buzzword in the finance industry but are actually something that adds value to your investment portfolio. Mutual funds may seem complicated to someone who has not invested yet, but it is actually not that complicated. When someone thinks about investing in mutual funds they are not exactly sure what they are, how do they work and how can they invest in them?
So to answer these questions, let us first understand what mutual funds are. Mutual Funds is an investment product where the money is pooled in from various investors to invest in different types of products like shares, debentures, bonds, and money market instruments. When someone invests in mutual funds they are owning a small stake in those investments which are included in the fund. Now, the money is pooled in by the Asset Management Company or AMC which is responsible for strategically managing the investment keeping in mind the investment objective and maximum return generation. Each AMC has various fund managers who are responsible for looking after the funds and ensuring that the objective is met as well as investors are getting good returns.
Investing in mutual funds is not tough and just requires a few formalities and understanding of your own risk-taking capability and the amount that you would like to invest. Since now you are clear with what are mutual funds and how the pooled money is put to use. We can now move forward to what all steps need to be followed to invest in mutual funds. The steps that need to be followed are
Set a clear goal for which you would like to invest in mutual funds like buying a car, buying a house, post-retirement plan, etc. This will help you get clarity on how much amount you would like to accumulate and in what time could it be achieved.
Get your KYC (Know Your Customer) completed which requires basic details along with the proofs like PAN card, Age Proof, Residence Proof, etc. Bank account details are mandatory for investing in mutual funds.
There are various options available in the market and are designed for every type of investor. So next, you need to choose the mutual fund scheme that you would like to invest in, after exploring all your investment options, weighing the pros and cons for each of them and the risk associated with them.
Once you have selected your scheme and have planned to invest in it, all you need to do is complete the formalities as suggested by the broker and also give instructions to your bank regarding the deduction of the amount.
In just a few steps, you can invest in any mutual fund of your choice and can earn higher returns than the other forms of investment.