Mutual Fund Beginner? Follow these 5 Tips

Mutual Funds seem to be convenient for every person to invest in. Mutual fund beginner are always in search of high returns, but you need to have a bit of knowledge. Even if you are a beginner in a mutual fund with a small amount, you benefit from a professional fund manager.

Yes, the investment manager manages your money and advises you to invest in different sectors.

However, the money gets diversified, hence less risk involved, but you can’t say there is no risk involved in mutual funds.

5 Tips for Mutual Fund Beginner

I think mutual funds have evolved to become a household name in investment. It entered a mutual fund, as the name suggests.

Collect funds from investors for financial goals and invest them in different sectors with certain goals and objectives. Mutual fund schemes have several types in India, and interested people can find the process overwhelming.

We are here today to find the quick tips to help you invest in mutual funds if you are a beginner. It is a mini-guide that will help every mutual fund beginner. So, here we start with some tips and tricks. 

What is Inflation?

Before you start investing in these funds, it is necessary to determine the financial goal and understand the different options available.

Here are some tips that will help you understand how to go about with mutual fund investments. If you are a first-time investor or mutual fund beginner, these tips and tricks are definitely for you.

Tips and Tricks for Mutual Fund Beginners

What is your Investment Goal

It helps you put money in mutual funds with a clear investment goal. The fund manager invests the money with debt funds based on the financial objectives.

If you want to create the funds for your retirement or buying a house, you just have to invest in equity-based instruments for an extended period. You are achieving short-term goals, debt-based investment options.

Choose the Right Fund

Mutual Funds Beginners sometimes rush to make decisions that affect their portfolios. The experts in mutual funds recommend the balanced or debt fund for first-time investors that includes minimal risk.

Long Term Objectives

Your long-term goals should be majorly defined when you think of investing in mutual funds. Investing in equity-based mutual funds to achieve your long-term goal will be the better idea; the fund managers buy shares of different companies with capital.

You can either go for Long Cap, Small Cap, Multi-Cap, or Small Cap.

• Large Cap: These are generally invested in top 100 companies in terms of the market share. Some companies like RIL, TCS, Infosys are amongst the Large Cap. The large-cap usually offers you 7%-8% returns.

For instance, people usually plan for retirement; suppose you have 30 years left and want to accumulate a decent amount of wealth. Then, you can think of investing in large-cap mutual funds in India. You are earning a handsome salary and want to invest 41000 every month to accumulate the profit in 10 years; the result would be Rs 75 lakhs in 10 years from large-cap mutual funds.

• Mid Cap: These funds are from Mid-Size companies. For example Bata, Votas, etc. In the last few years, it was analyzed that these companies have offered 11% to 12% returns on investment.

For instance, these mutual funds can help you generate significant returns without any doubt, but the risk is too involved in it compared to large-cap funds. For example, if you are investing around Rs 34500 a month, you can expect 10 years to get the amount of Rs 75 Lakhs.

• Small-Cap: A small-cap fund by shares of companies with a market capitalization of fewer than 500 crores. You can expect returns of 14%-15%. However, the risk is highly defined in these funds. 

For instance: If you are investing 27000 every month, in 10 years you can expect to get Rs 75 lakhs. But these are highly risky.

• Multicap: These funds invest in shares of the different large, medium, and small companies to diversify the portfolio. The returns are the same as mid-cap funds, but the risk is diversified.

Shortlist and Choose Single Fund if you are Mutual Fund Beginners

You have to analyze and compare a plethora of mutual fund schemes in different categories to shortlist the right investment for you.

Mutual Fund Beginners should not ignore the factors such as the fund manager’s credentials, portfolio components, and assets under management.

Diversifying your Portfolio

Consider investing in more than one fund if you shortlist more than one fund. It helps you to diversify the risk-adjusted returns.

In addition, a portfolio of funds helps you diversify across asset classes and investment styles. It will also even out your risk, as sometimes, one mutual fund might underperform. 

Conclusion

You can invest in mutual funds in a hassle-free manner, without any paperwork. Follow these simple steps to start your investment plans as a Mutual Fund Beginner. First, start your journey with an appropriate mutual fund scheme based on the investment.