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Simple Guide on Your Mutual Fund Investment Journey

Simple Guide on Your Mutual Fund Investment Journey

Mutual Funds are one of the most promising ways to invest in the stock market, especially if you don’t have the expertise or knowledge to invest directly in stocks. They are well diversified, low cost, tax efficient and professionally managed investments. If you are planning to invest in mutual funds, here’s a simple guide to help you with your mutual fund investment journey:-


1. What is a mutual fund investment?

A Mutual Fund is a professionally managed investment fund that pools money from various investors to invest in the stock market to gain the highest possible returns. Given its professional management by expert fund managers, mutual funds carry less risk as compared direct stock market investments. Hence, it’s an ideal investment for investors who have limited knowledge and time to invest directly.

2. What are the different types of mutual funds?

Mutual funds are broadly classified into three categories:-

Equity Funds

Equity mutual funds invest primarily into stocks or company shares. They aim to generate high returns by capitalizing on market movements. In other words, when the price of the share rises, mutual fund investors earn a profit. The returns offered by equity mutual funds are generally higher than other funds, however the risk of loss is also high. Hence, equity funds are suitable for those investors who have an appetite for risk and want to stay invested for a long time.

Debt Funds

Debt mutual funds invest principally in fixed income securities such as company bonds and treasury bills. It offers stable returns and is less risky than equity mutual funds. Hence, debt funds are suitable for risk-averse investors who want to invest for the short term.

Balanced/Hybrid Funds

Balanced or hybrid mutual funds invest in both equity and debt funds. This unique composition helps maintain a balance of risk and returns in order to maximise profits. This type of mutual fund is ideal for investors with a low-risk appetite.

2. How to invest in mutual funds?

You can invest in mutual funds through fund houses, banks or agents. Investing in a mutual fund with Citibank is a simple and quick process. Simply download the KYC form and submit the completed form at your nearest Citibank branch. Additionally, with Citibank you have the option to invest in a variety of mutual funds from leading fund houses in India via Systematic Investment Plans or SIPs.

3. Tips to maximise your mutual fund returns

Invest via SIPs

SIPs encourage regular and disciplined investing without straining your budget. With SIPs, you can begin investing in mutual funds with an amount as low as Rs 500 on a monthly basis. Moreover, it eliminates the need for market timing and helps your reap greater returns thanks to the power of compounding. Plan your Systematic Investment Plan without any hassle with this SIP calculator now!

Review your funds periodically

It’s a good practice to do a periodical review of your funds’ performance based on your changing financial needs and risk appetite. This will ensure that your investments remain active according to the market conditions which will ultimately help you generate a good return on your investment.

Be open to taking risks

If you are planning to invest for the long term, don’t shy away from choosing riskier funds like equity. While equity funds are volatile by nature, they generate higher returns over time. If your investment is spanning 5-10 years, it’s wiser to select volatile funds like mid-cap funds as they tend to rise higher than broader indices. Moreover, if you invest in equity through SIPs you can make the most of the “rupee cost averaging” benefit.

Invest for the long-term

Mutual funds are a great long-term saving instrument especially if you are investing in equities. If you think you can secure great returns by banking on a short-term market wave, you are bound to be disappointed with the returns. Therefore, make sure to stay invested for a term of at least 3-5 years.

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