When it comes to investment, your first reaction is “Do I have to?”. So, you put it off thinking you don’t need it. But, one day, you find maturity walking through the door. You realise that you need to save and have some money in the kitty to meet your life goals. So you decide that you’ll start investing in mutual funds. But there are so many out there! How do you choose?
Here’s our mutual fund investment guide for new mutual fund investors:
Before we begin, let’s refresh your memory on what mutual funds are. Mutual funds are tools that enable small investors to pool money and invest in various instruments like debt and equity. There are many types of mutual funds, designed to suit different risk profiles and personal financial goals. Mutual funds are becoming increasingly popular because of several reasons:
- Potentially better returns on investment
- Choice between many types of schemes
- Safer than investing in equity directly
- You can invest small amounts starting as low as Rs. 500 per month
- Easy to invest
- Managed by professional fund managers
Prepping to Invest:
Any useful mutual fund guide will begin by telling you that the first thing to do is get your Mutual Fund KYC (Know Your Customer) done. As we’ve mentioned before, a mutual KYC is a SEBI requirement. Don’t fret in case you don’t have your KYC, we can get it done for you free of cost. Just follow the below steps :
- Download the DBS digibank app.
- To get started you’ll need a digibank account. This account gets activated instantly through a mobile OTP.
- Aadhaar based biometric verification of your digiSavings account is seamless and quick. You can do it at our partner stores or in the comfort of your home
- Once your biometric verification is successful, you can access the Mutual Funds tab on the app to open a free investment account. All you need to do is to have your Mutual Fund KYC in place
- Fret not if you don’t have the Mutual Fund KYC. [email protected] can submit your personal KYC details to the SEBI authorized MF KYC registration agency & get you KYC compliant. Its paperless & has no extra cost. To authorise us, simply login to the app
- Once your investment account is open, you are all set !Through the digibank app, you can pick one from over 250 schemes from 15 top AMCs
Choosing a Fund Type:
As we said earlier, there are over 250 mutual fund schemes, so let’s get down to brass tacks. The simplest way is to decide is based on asset composition. That is, whether a mutual fund invests in debt, equity, or both. Here’s how you choose:
Choose a debt fund if…
- Your appetite for risk is low. But remember that debt funds too involve some elements of risk like interest rate risk.
- You like to go steady and don’t mind lower returns as compared to equity Mutual Funds
- You want to invest money for a short time: < 3 years
- You have family obligations and don’t want to risk fluctuating returns.
Choose equity funds if…
- You have a moderate to a high appetite for risk.
- You expect higher returns on investment.
- You’re comfortable with stock market volatility.
- You can invest for more extended time frames: 5+ years
Choose balanced (Hybrid) funds if…
- You have a moderate risk appetite.
- You expect the returns of equity and but want to steady the boat with some debt.
- You want a diversified portfolio.
Picking the Right Scheme:
Choosing mutual fund schemes is not like crowning the prom queen. It’s not a popularity contest. Once you’ve made your asset choice, here are three crucial things you should consider while investing in a mutual fund scheme:
- Past performance: You can compare returns of various funds over several years online. Look for those that have shown consistent returns over several time intervals, like one, three and five years. You can compare funds in the same category, or across to find the perfect match
- Rating: In India, mutual funds are rated by several organisations. Look for funds with ratings between 4 and 5 stars. Top-rated funds typically will give you better returns. On digibank we provide you with ratings from the research agency Morningstar
- Risk Appetite: Before you begin investing you must understand how much risk you can take. The digibank risk profile questionnaire will help you evaluate your risk appetite for investing. The app will also alert you in case you choose a fund which is above/outside your risk profile. To know more about your risk profile refer this article: https://www.dbs.com/digibank/in/articles/understanding-your-risk-profile
Scheme Objective: There are two primary objectives in mutual fund schemes.
- Dividend: In the dividend option, any dividends declared by the fund house is distributed to investors. This is ideal if you’re looking for regular income.
- Growth: In the growth option, instead of paying out dividends, your investment is allowed to grow. The growth is reflected in the appreciation of the NAV. Choose this option if capital appreciation is what you want, and you are prepared to stay invested for more extended periods.
Buying Your Scheme:
Our mutual fund investment guide must have made it easier for you to choose your scheme. Now it’s time to buy the funds of your choice. Investing in mutual funds is now much more accessible through the Internet and the smartphone. In a previous article, we’ve talked about how you can begin investing faster through the DBS digibank app. Just download the DBS bank app and follow instructions.
Our mutual fund guide will help you to make investment decisions. But ultimately the choices that you make depend on several things like your goals and risk appetite. Besides, stock market and interest rate movements are hard to predict and even well-made decisions come with risk. But planning and understanding can reduce the downside and help you maximise returns from your investments. So, no more waiting, begin investing today!
digibank offers Mutual Funds that are instant, paperless, signatureless – even transaction fee-less! What’s more? You get to choose from 250+ Mutual Funds across 15 top-performing asset management companies. So why wait? Login to digibank (app or internet banking) and start investing in a flash with instant Mutual Funds on digibank.
Read up more on Mutual Funds here
Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.