How to start investing in mutual funds in 2020?

How to start investing in mutual funds in 2020

When it comes to investment, every investor wants to invest its hard-earned to earn profit by putting its money on risk. Mutual funds are becoming a very popular investment option these days because mutual funds provide various benefits to investors. Almost every person can invest in mutual funds because there is a scheme for everyone in mutual funds as per His/Her financial goals. Mutual funds offer a lot of benefits to its investors such as professional funds management, diversification of portfolio and tax benefits but still, it is always recommended to learn basics of the market before.

We will be sharing step by step instructions on how you can invest in mutual funds and make excellent returns.

Starting steps – To begin your investment in mutual funds you need to have a bank account for money transaction process, you should get your internet banking activated although mutual funds allow investments through debit cards and cheques but internet banking can save a lot of time.

Another important step to start your investment in mutual funds is KYC. You must have to be KYC (Know Your Customer) compliant, you cannot invest in mutual funds if you have not completed KYC process, KYC is regulation from government of India to complete any financial transaction.

You can register for KYC to the registrar or transfer agent and you can also complete the KYC process directly through the mutual fund house.

At last, you need PAN (permanent Account Number) card and a valid address proof it can be your Aadhaar card or voter card.

Start with a small amount – It is necessary to begin your mutual investment with a small amount most possibly with few thousands of rupees. When you are new in mutual funds investment there are chances you may pick the wrong scheme so you may lose money so it is important that you should start with a small amount to avoid any major loss. Once you gain experience of mutual funds investment then you can invest a major amount.

Choosing plan – Mutual funds are one of the best options for investment but choosing the right scheme for you can be very difficult especially when you have more than 2,500 schemes. You have to choose mutual funds as per your financial objectives and risk tolerance.
You have the option of debt mutual funds although debt mutual funds offer lower return but at the time they are safest mutual funds and offer steady risk-free returns.

Mutual funds also have equity-oriented funds. Equity mutual funds offer a higher return as compared to debt funds. Equity funds are volatile they can offer better returns but the risk of loss is also higher because the equity market never runs in the same direction for a long time. Investing in equity is a long learning process because equity large and deep within equity there are small-cap, mid-cap and large-cap companies all of these caps are the different rates of volatility, growth and risk.

Another type of mutual fund schemes available are known as balanced or hybrid mutual funds, these mutual funds invest money in both debt and equity markets. Usually, balanced funds are equity-oriented and invest 65%-80% portion of funds in equity and the remaining portion in debt.

Mutual funds – Direct plan vs regular plans – When you begin investing in mutual funds you have two options either you can directly invest in mutual funds or you can invest via the broke house. Investing in mutual funds directly can you’re a lot of unwanted expenses and annual commission charges. Although in beginning it can be difficult for new investors to manage a portfolio, actively tracking, rebalancing and switching funds etc so its recommend for new investors to invest via broker so they can get financial advice from professional fund managers, professional portfolio management and active tracking etc. Once you gain experience in market and mutual funds investment then you can do direct investment in mutual funds.

Regularly monitor your investment – Once you have invested in mutual funds it is important to regularly monitor your portfolio and investments although you don’t need to watch updates everyday buy still you should monitor weekly and monthly updates. If you invested through a broker than broker and fund manager can do it for you but it is still recommended you should monitor your investments so with these efforts you can become a professional and experienced investor in future.

When to exit or sell – There can be various reasons to exit or sell your funds, it can be the poor performance of your mutual funds and your mutual fund has achieved your desired target.

Poor performance – It can be one of the main reason for new or beginner investors because they may not be picked right fund at right time because of their lack of experience. When a fund underperformed and didn’t meet your targets then you should exit or sell immediately. If a fund underperformed for one month then wait for few more months before exit and if possible take professional fund manager’s advice.

Hitting your targets – Once your debt fund has hit your desired target you can simply exit and collect the cash. In case of equity funds, you should not sell your all funds in one go, you should come out slowly and systematically to avoid any sharp decline or unpredicted move in equity.


Every mutual fund is subjected to some risks so it is important you should learn and understand the complete process of mutual funds investment. Once you get the experience of investing in mutual funds than it can be a really good option for you to earn excellent returns.

Happy Investing!  

Team R Wealth

Team R Wealth

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