• HDFC
• 28 Jun 2018
• MF Overview

HDFC, Tester

Mutual funds are managed by investment professionals. As such these funds are also a good place for someone who is just starting out and looking for an entry into the world of financial markets. But how exactly do you go about investing in a mutual fund? Well, here are some things you need to consider when beginning your mutual fund journey.

 

1.      Lumpsum or SIP

 

Before you begin to invest in a mutual fund, you need to figure out one thing first: whether the investment will be made in a lump sum or through a SIP. This is a Systematic Investment Plan, wherein investors caninvest a small amount of money in a particular mutual fund, at regular intervals. This sort of plan allows you to purchase fund units on a particular date, every month, in order to help you implement a savings plan.

 

2.      Risk and Reward

 

Once you have figured out the previous point, you need to consider what sort of risks you are willing to take. Mutual funds are safer than a direct investment in shares on your own. If you still believe that you need to test the waters, then opt for a SIP or open-ended scheme.

 

3.      Safety and Market Risks

 

Mutual funds are subject to market risk. They are safe in the sense that they are regulated by Securities and Exchange Board of India (SEBI). And companies are always required to maintain a minimum net worth in order to set up an AMC, but your investment will always be fair game to the ups and downs of the market.

 

4.      Liquidity

 

If you feel that you may need to cash in your investment at any given time, then certain mutual fund schemes can provide a good option in that regard. Usually, these are open-ended mutual funds, wherein fund units can be bought and sol freely, without any time restrictions of close-ended or intervallic mutual funds.

 

5.      Your financial goals

 

Before you choose what type of mutual fund scheme to opt for, it is advised that you understand and map out your financial goals. If you have short term financial goals, like for two to three years, then you can invest in a debt mutual fund;your investment needs to be protected from unnecessary risks, and you don’t have time to recover any losses. But, if you have a long-term goal, then you can invest in equity funds, as they provide the perfect opportunity for superior returns on your investment.

 

6.      Schemes and Professional management

 

First time investors are always advised and encouraged to hire and professional to help with the management of their mutual funds. Further, a professional fund manager can help you understand the schemes that may be right, based upon your risk profile and your financial goals.