16.7 How to invest in mutual fund?

Hanumant Dhokle

Step One

Are you ready?
How can someone be ready before identifying one's investment needs. right? So Identify your financial goal. Of course, it might vary based on your age, lifestyle and financial freedom.

Ask yourself:

  1. What are my investment objectives and needs?
  2. How much risk am I willing to take?
  3. What are my cash flow requirements?
  4. Do I need regular income?
  5. Do I plan for wedding of my daughter? Or buy a house?
  6. Is education of kids my immediate priority?
  7. Am I interested only in financial freedom during retirement? 

By going through such an exercise, you will know what you want out of your Investment and can set the foundation for a sound mutual fund investment strategy.

Step Two

Make the right choice

In other words - Choose the right mutual fund. Once you have a clear strategy in mind, evaluate the mutual fund-How? Again explore.

  1. The track record of performance over the last few years in relation to the appropriate yardstick and similar funds in the same category.
  2. How well the mutual fund is organized to provide efficient, prompt and personalized service?
  3. Degree of transparency as reflected in frequency and quality of their communications.

Step Three

Mix it right
Select the ideal mix of schemes. Please remember, investing in just one mutual fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.

Step Four

SIP in Mutual funds
For most of us, the approach that works best is to invest a fixed amount at specific intervals, say, every month. It brings to you all the advantages of SIP which we have already discussed in our equity module earlier.

Step Five

Keep your taxes in mind
As per the current tax laws, dividend/income distribution made by mutual funds is exempt from income tax in the hands of investor. However, in case of debt schemes dividend/income distribution is subject to dividend distribution tax. Further, there are other benefits available for investment in mutual funds under the provisions of the prevailing tax laws. So, better consult your finance advisor to achieve maximum tax efficiency in mutual funds.

Step Six

The final step
All you need to do now is to get in touch with a mutual fund or your advisor and start investing. You can do a comparative research on all the mutual funds schemes, their historical returns and current NAV etc. through many online portals. For example, Association of Mutual Funds in India (AMFI) provides daily NAV reports of all the mutual funds schemes/categories at http://www.amfi india.com/navreport.aspx.

In addition, www.valueresearch.com and www.mutulfundsindia.com, etc. also give details about all mutual fund schemes

Rate this article:
No rating
Comments are only visible to subscribers.

Equity Research


Investment in securities market are subject to market risks.Read all the related documents carefully before investing.
Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.