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Things to know before you invest in Mutual Funds

Mutual Funds are now one of the popular forms of investment primarily into equities. Mutual Funds sahi hai, but these are the few things which every investor should know before investing in mutual funds

  1. Do I need large funds to invest?

    It is a common notion that, to invest one needs to have large amounts. But in mutual funds, minimum investment through SIP mode is just Rs. 500 and for lump sum investment, it is Rs.5000.

     

  2. Should I invest lump sum or through SIP mode?

    In mutual funds, we can invest either on monthly basis (ie SIP) or a lump-sum amount. For first time investors it is always advised to start investing in mutual funds through SIP mode instead of lump sum investment

  3. How long should I invest in equity mutual funds?

    Investing is like farming. Once you have started investing you need to give your money enough time to grow and give you the desired results. In the first 2-3 years of your investment you may witness high variations in your returns based on the market condition. In equity mutual funds one should stay invested for at least 5 years.

  4. Can I take a break during the SIP period?

    Yes, you can pause your monthly SIP investment whenever you want to and restart your investment again when your financial situation permits. Even if you fail to invest for a month or two, due to other financial emergencies, you need not withdraw the whole invested amount; your funds will still stay in the market.

  5. Can 50+ aged people also invest? :

    In mutual funds there are debt funds too, wherein there are not subjected to share market risks. Long term debt funds give better returns than investing in fixed deposits (FD’s) and are also tax efficient. Such funds are best suited for the investors who are not ready to take risks in the share market cycle.

  6. Power of SIP:

    Since there exists market fluctuations, SIP comes to rescue, it averages the volatility of the market. For lump-sum investment, entry into mutual funds is to be noticed.

  7. Never pick funds based on 1 year returns:

    Sometimes, funds may seem lucrative especially when they show out-performance in last 1 year. We suggest you to look at long term consistent returns in mutual funds rather short term performance

  8. Do I need a financial advisor?

    No, you don’t need a financial advisor for investing in mutual funds if you can evaluate various funds and decide best suited funds for you. If you are a first time investor or not comfortable in evaluation of various funds then its advised to seek support of a financial advisor for investing.