Mutual Funds is a pool of funds, where money is gathered by investors. This money is later utilized for purchasing stocks, bonds and other securities. The securities are selected based on the objective of the mutual fund which is mentioned in the scheme information document.
How Mutual Funds work?
Mutual Funds follow a specific process. Its steps include
New Fund Offer (NFO) is issued when an Asset Management Company (AMC) raises fund for the first time. The function of an NFO in MF is same as IPO in equities. However, in NFO, every investor shall own the units they have bought, but in IPO, these stocks are not allotted to all. Further, in NFO the investor also gets units in exchange for their investment.
The strategy for the NFO that is fixed by the fund manager cannot be changed as all the investors have invested their money based on this strategy. Before investing, one should consider all the factors like the objective of the fund, cost of investment, etc.
To every investor, irrespective of the holding, everyone gets ₹10 units at par. This value can move up and down with equity market. There are different types of fund allocations that are equity oriented, equity & debt funds and Debt funds.
Investing in securities:
The money that is collected is now invested in securities. This portfolio is set up by a portfolio manager who does a thorough research of all the securities and performs industry wide analysis.
In some cases, portfolio managers use multiple strategies for choosing a security fund. Such efforts given by these managers lead to generate large portfolios.
Returning of funds:
It is the responsibility of the portfolio manager to ensure that profitable returns are achieved on behalf of these investors. They put their effort into monitoring, rebalancing and manage the portfolio.
They do not guarantee any return and can be in both profit and loss depending upon the market situation. After the amount is repaid to the investor, the balanced amount is again re-distributed to the remaining investors.
How much to invest in Mutual Funds as beginners?
For first time users, investing in Mutual Funds can be very confusing. But, it can also be the first step to one’s investment journey. The minimum amount with which a person can start investing in this fund is ₹500. This is only possible through SIP. Under other investment options, investing with such a low amount is not quite possible.
How to open Mutual Funds Account with SMIFS?
You can start investing in Mutual Funds with SMIFS easily via the SMIFS Mutual Funds app.
- Download the SMIFS Mutual Funds app from Play store.
- Choose the option ‘I want to Register’.
- Enter your name, PAN card number, e-mail id and phone number.
- SMIFS will then send you a 6-digit verification code via sms to verify your phone number.
- Then, you will have to verify your email ID via code sent to your e-mail ID.
- Your log-in credentials will be sent to you on your e-mail ID.
- Initiate on-boarding process by completing your PAN KYC. You can finally start investing in Mutual Funds from this application.
How to invest in Mutual Funds online?
There are 5 simple steps to start investing in Mutual Funds.
- Investors first need to understand the risk tolerance and the risk capacity of the portfolio they are planning to undertake. This step is called risk profiling.
- In the next step, shareholders will have to start with asset allocation. Here, they can identify their risk factor and the asset classes that will provide them with minimum losses. For this, they can mix both equity and debt instrument to lower the risk factor.
- Investors must identify the asset classes they can invest in and then compare MF based on investment objectives and past performances.
- Decide the schemes to be invested in and fill in the application online.
- Aim to diversify the environment to get the best returns.
How to Invest in Mutual Funds in India?
Investing in Mutual Funds in India is easy. One can start investing directly through an Asset Management Company. But, before that, the investor needs to complete his PAN KYC verification. If a shareholder wants to invest in mutual funds for a regular plan, he/she can take help of a mutual fund distributor.
For this, the Mutual Fund house shall pay a commission to the distributor. One can also invest in MF offline by visiting the Mutual Fund house, filling in an application form and submitting his/her documents.
When to start investing in Mutual Funds?
An individual can start investing in Mutual Funds through small amounts periodically to ensure flexibility. Another factor that is making this service even more popular among people is that they have the potential to provide inflation-beating returns.
FREQUENTLY ASKED QUESTIONS
Q. Can I invest in Mutual Funds without Demat Account?
A. It is not necessary to have a Demat account for investing in Mutual Funds. Investors can also invest in MF without a Demat. But, if there is any change made regarding client information, a small change in the kyc shall implement the change throughout all AMCs.
But, if the investor has to make a change in its client data, the registrar/individual fund houses will have to be informed. For filling up the registration online, investors can choose the online portal, ‘SMIFS Mutual Funds’.
Q. Is it possible to start investing in Mutual Funds without a broker?
A. No broker is required to invest in Mutual Funds. Investors can either contact an AMC or visit a Mutual Funds House with the required documents ( PAN Card, address proof and Passport Size photo) for investing.
However, for first time users, it is advisable to take help of an MF financial advisor for better understanding.