Beginner’s Guide to Invest in a Mutual Fund- Know the Complete Details Here

When it comes to a mutual fund, there is no denying the fact that it is surely one of the most popular ways of making an investment and building wealth. But things are difficult for those who don’t know the nitty and gritty of MF, especially if you are a beginner. Yes, that’s right! For beginners, investing in MF is complicated and confusing as they don’t know from where to start.

However, keeping this thing into consideration, we are here to give you a complete beginner’s guide to invest in a mutual fund and ultimately help you to understand what they stand for, how they work, and the things you need to keep in mind while investing. So, without wasting any time further, let’s just begin.

mutual-fund

What is an MF:

Let’s just put it in that way- a mutual fund is one of the safest modes of investment, actually a pool of money provided by the individual investors, companies and other organisations. To help the investors or you can say to liquidate the money in the market, fund managers are hired. Yes, whatever cash investors have, these fund managers invest the same in different schemes after through research and analysis. The main objective of these managers is to help you in reaping the maximum benefits in the future while ensuring that your hard earned money will be in safe hands.

Now that you know what MF is all about, its time to understand Open and Close Ended Schemes. So, go through this article below and know more about the same.

Open-ended Funds: In open-ended schemes, the investors can anytime enter or exit in a fund as per his/her convenience. The buying and selling of units will remain same even after the initial offering i.e. NFO period. Basically, the units are bought and sold at the Net Asset Value (NAV) declared by the fund. In these types of funds, whenever a fund house repurchases or sells the existing units, it would not be wrong to say that number of outstanding units goes up or down. Hence, that is why in these types of funds, the unit capital keeps varying.       

 Close-ended Funds: If we talk about close-ended funds, the unit capital, in this case, is fixed and they sell only a specific number of units. The investors cannot buy the units after its NFO period is over , unlike in open-ended schemes, which means that a new investor cannot enter nor the existing investor can exit till the scheme ends. But, one thing that needs to be mentioned here is the fact that in order to provide investors a way to exit before a term, various fund houses list their closed-ended fund schemes on the stock exchange.

How to Select a Right Fund:

Your next focus should be on selecting a fund that is right for you. Well, the key here is to select a fund depending upon its investment consistency and philosophy in terms of maximum returns. Before entering into a fund or selecting a right type, it is you who need to decide your needs first and then take the next step.

  • The first and foremost thing you need to decide is actually your financial goals.
  • The next comes the purpose of investment, it is for your child’s education, retirement or just for the sake of savings.
  • Think about the time-frame. Would you able to invest for 10 months or is it 10 years? Raise a question from inner self after considering your monthly expenses.
  • Are you ready for the risks involved in an MF? Are you in a position where you can manage the ups and downs of the market for the sake of higher returns?

How to Invest in an MF:

If we talk about how to invest in an MF, you can easily invest your hard earned in the same, if you already have a brokerage account. Here, you can  go for the mutual fund shares just like a share of stock. And, in case you don’t, you can visit the fund’s web page or get in touch with the experts so as to request for the information and application. If you are a beginner, it would be advisable for you to hire an expert fund manager as he/she will help you out in every aspect.

Well, at the end, we are hopeful that this guide to invest in a mutual fund will be helpful for you in the future.

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