1. Define Your Goals – What do you hope to get from your mutual fund investments? Clearly setting financial goals will allow you to account for a number of important factors. It will allow you to determine if you are investing for short-term goals (less than 3 years), medium-term goals (3-5 years), or long-term goals (more than 5 years), and it will help you choose suitable mutual funds that align with your investment horizon and risk tolerance (and it can help you stay motivated to keep investing! 

2. Assess Risk Tolerance – How well do you handle yourself when things don’t go your way? Because there is an inherent risk when it comes to investing (don’t listen to anyone telling you otherwise!), even in mutual funds.

But, the important thing is to clearly evaluate your risk tolerance, i.e., your ability to financially (and emotionally) handle potential losses.

Typically risk is classified as high, medium, or low, depending on the mutual fund you are investing in, so you can decide if you’re up for the challenge of high-risk mutual fund investments, or if you’d rather opt for low-risk investments that are relatively stable instead – you will find all kinds of options for your chosen risk profile. Also, be sure to reassess your risk tolerance from time to time!

3. Research Mutual Funds – How much do you know about where you want to invest? Research is probably one of the most important tools in your arsenal! Conduct thorough research on various mutual fund options available in the Indian market.

Consider factors such as fund performance, investment strategy, fund manager’s expertise level, expense ratios, and the fund’s track record. It is also important to make sure that before you invest in mutual funds you are referring to genuine websites offering valid information and research reports, or seeking advice from reputed financial advisors to get some hands-on guidance.

4. Select a Fund – Which fund are you picking? This one is simple! After diligently following Step 3 – you can select the mutual funds that you want to invest in.

Here are some of the best mutual funds for SIP that you can select from – 

• SBI Mutual Fund
• Kotak Emerging Equity Fund
• Axis Small Cap Fund
• Aditya Birla Sun Life Mutual Fund
• IDFC Mutual Fund

Now you’re in it! Up till this point, you are in the information-gathering and decision-making phase of the investment process. From this point out, you are looking at more actionable steps to take for a successful mutual fund investment journey – 

5. Set Up a Mutual Fund Account – To invest in mutual funds – online or otherwise – you need to open an account with a mutual fund house or a registered online platform known as a Mutual Fund Utility (MFU).

You can easily hop onto the website of your selected mutual fund house and securely set up your mutual fund investments. Visit the official website of the chosen mutual fund house or MFU and follow their account opening procedure.

You will be required to fill in some basic details, submit the necessary documents (KYC documents), and complete the verification process. 

6. Complete Your KYC – KYC stands for Know Your Customer. It is a fairly routine requirement for usual bank work, and of course, investing in mutual funds – and it is mandatory for all first-time investors (and regular investors have to keep their KYC up-to-date at all times).

As a new investor, you will need to complete the KYC process that complies with regulatory requirements by providing the necessary KYC documents. These include proof of identity, proof of address, and your PAN (Permanent Account Number) card.

You can complete your KYC online or through physical verification as per the guidelines of the mutual fund house or MFU. (Deciml KYC takes all of 2 minutes, in case you were wondering!)

7. Choose the Mode of Investment – Decide on the investment mode based on your convenience – investing in mutual funds can be flexible and doesn’t necessarily require large sums of money.

You can choose between the lump sum mode (investing a one-time amount) or the Systematic Investment Plan (SIP) mode (investing a fixed amount at regular intervals).

SIPs are popular among new investors as they allow you to invest with smaller amounts regularly and benefit from rupee-cost averaging. (P.S.: with Deciml, you can set up a daily SIP of as little as ₹10!)

8. Fix the Investment Time – It is important to determine how long you want to stay invested and make mutual fund investments accordingly.

For short-term goals, consider debt funds, while for long-term goals, equity funds may be better suited. You can also opt for hybrid funds that offer a mix of equity and debt components. Ensure that the chosen funds align with your overall investment goals, and ultimately add to your financial portfolio.

You’re ready to start allocating funds to your investments at this point. There is only one thi… Erm… Two things left to do (but they go hand in hand!) – 

9. Invest & Monitor Your Money- Once you have selected the mutual fund, choose the investment amount and initiate the investment process (yay!) If you are about to invest in mutual funds online – log in to your account, select the fund, and provide the investment details.

If investing through offline channels, submit the investment application form along with the investment amount with your investment advisor.

After making your mutual fund investments, regularly monitor your funds to assess their performance and make necessary adjustments if and when required. 

Congratulations! You are now an investor! 

Remember, investing in mutual funds always involves market risks, which is why it is important to understand the fundamentals of investing, diversify your portfolio, and maintain a long-term perspective throughout your investment process. 

FAQs

How long do I have to stay invested in mutual funds?

You can make mutual fund investments for short-term goals (less than 3 years), medium-term goals (3-5 years), or long-term goals (more than 5 years).

What do I have to provide for the mutual fund KYC?

Investing in mutual funds will require you to do a KYC (online or otherwise). Typically, you will have to provide proof of identity, proof of address, and your PAN (Permanent Account Number) card.

Are mutual fund investments risk-free?

No form of investing is risk-free. Mutual fund investments can be low, medium, or high risk, depending on the type of fund you opt for.

What are the modes of investing in mutual funds?

You can choose to invest in lump sum mode (investing a one-time amount) or the Systematic Investment Plan (SIP) mode (investing a fixed amount at regular intervals) – or you can choose to round-up invest via Deciml!

Are mutual fund investments through SIPs useful?

Yes. They allow you to invest small amounts while building the habit of investing regularly. SIPs can also be automated, making them cost and time efficient.