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What are the Best Ways to Invest in Mutual Funds in 2022?
Mutual fund investment has become a popular way of investment due to the many benefits it provides. It lets the investor invest in mutual funds without opening a Demat account and invest with as low as INR 500. In mutual fund investment, the investor can invest either in a lump sum or through a Systematic Investment Plan (SIP). Mutual funds are generated when an Asset Management Company (AMC) pools investment from different investors with common investment objectives. The fund manager then invests the money in securities to generate maximum returns for the investors. The investor earns money through regular interest and capital appreciation. Before understanding the best ways to invest in mutual funds, here are some important things to consider for beginners before investing in mutual funds.
Investing in Mutual Funds for Beginners
A lot of first-time investors do not invest in mutual funds because they find the process very tedious. However, investing in mutual funds is a paperless and straightforward process that can help you in generating a steady income if investments are made in the right way. Here is a beginners guide to mutual funds before investing.
Choose a Mutual Fund
There are many mutual fund investments schemes that can be very overwhelming at times. Seek financial advice from a mutual fund expert or distributor to guide you for the best investment mutual funds to invest in to save you from a herculean task.
Fix an Investment Goal
Mutual funds always work best when done with a purpose. Before investing in mutual funds, you need to define your financial goals and then fix a budget. Doing this exercise will help you decide how much money can you keep aside for mutual fund investment.
Keep Your KYC Updated
You cannot invest in mutual funds unless you have not completed your KYC. This helps the financial institutions to know about your income source and prevent money laundering. You need valid address proof and a PAN card to become KYC-compliant.
Diversify your Mutual Fund Investment Portfolio
You can consider investing in more than one mutual fund to diversify your portfolio based on your financial investment plan. This will help you even out the risk even if one mutual fund underperforms, and the other mutual fund investments counterbalance it.
Ways to Invest in Mutual Funds
Once you have made a financial goal for mutual fund investment and finalised the scheme you want to invest your money in, it is important to understand different ways to invest in top mutual funds. Here is detailed information on different ways of investing in mutual funds.
Lump-sum investment or one-time investment is a type of mutual fund investmentwhere you invest all your investible surplus in one go. For example, if you have a surplus fund with you or have received a reward, you do not plan to spend it on useless expenditures. Rather, you look for investment options to get interest on capital gains. This is where investing as a lump sum on mutual funds will help you. Lump-sum investment has its own set of rewards if invested at the right time of market condition.
Systematic Investment Plan
Rather than investing your funds in one go, a Systematic Investment Plan or SIP is a more disciplined way of investing which can help you build a steady corpus over time. Through SIP, you can invest in as low as INR 500 to invest in mutual funds. If you are earning a regular monthly income, then the SIP model of mutual fund investment is ideal for you.
Systematic Transfer Plan
When you have funds and don't want to invest either in SIP or lump-sum, this is where the Systematic Transfer Plan (STP) comes into play. Investing in STP is relatively a safer and smart mode of investment. In STP, you can periodically switch or transfer one mutual fund to another mutual fund of the same fund house. Systematic Transfer Plan mode of mutual funds, if used prudently, can help you realise your financial objective.
Systematic Withdrawal Plan
The Systematic Withdrawal Plan is more of a withdrawal mode than an investment mode. SWP helps you to manage regular expenses without keeping the savings idle. SWP help you systematically withdraw funds from pre-invested mutual funds on a regular basis to meet your regular expenses, if any.
If you are interested in mutual funds investment, Muthoot Finance lets you choose from a wide scheme of mutual funds that suits your short or long term financial goals. Muthoot Finance lets you choose the best SIP plan using an online EMI calculator. Visit your nearest Muthoot Finance branch or visit our website to get in touch with our 24*7 customer service expert to give you the best financial advice for your investment needs.