How to Choose Mutual Funds for Beginners?

If you are wondering why to invest in mutual funds, here's why:

• They offer exceptional returns, and you can customise them to suit your risk appetite.
• They introduce you to sincere financial discipline.
• If invested timely and knowledgeably, they generate substantial wealth for your future.
• They can help you save tax through Equity Linked Savings Scheme (ELSS).
• You can begin your MF portfolio with as little as Rs. 500 monthly. How? By starting a systematic investment plan.

So, the real question should not be why should I invest in mutual funds, but how. Follow the steps listed below to choose the right MFs as a beginner.

Realistically figure out how much you can invest

Define your budget and the financial objectives behind investing in MFs. Doing this will tell you how much you can aim to earn with the amount you have set aside. Also, figure out your risk appetite. Given that you can invest in a wide array of MFs, ranging from low risk-return to moderate risk-return to high risk-return, you can finely customise your profile.

Research and shortlist MFs

Do you want to invest more in debt and less in equity or vice versa? Do you want to save tax through the ELSS fund or invest only a few thousand in an MF through SIP? Do you want a mixed bag of MFs with varying degrees of risk? Unless you read up on the types of MFs or consult a financial institution, you wouldn't know the suitable kinds of MFs to bring into your portfolio.

Once you know enough to invest knowledgeably, shortlist the right MFs from different categories. Since you are a beginner, we suggest you start slow, shortlisting MFs from fewer categories. After which, you can expand your portfolio within a few months.

Additional Read: Importance of Mutual Funds

Always Diversify

Not diversifying the type of MFs you invest in is like putting all your eggs in one basket. Even though the risk involved in several funds is low, you want to ensure that if one class of funds underperform, you have other categories doing well. Simply put, to even out the risks, always diversify your mutual fund portfolio. 

Reach out to a financial advisor

While investing in an MF is possible online these days, the entire process from research to selection to investment can overwhelm a beginner. Avoid all the muss if you feel confused and seek help from a legit financial services company.

They often comprise experienced financial experts specialising in MF distribution and monitoring. Not only can they help you choose the right mix of funds, but they also send routine reports on the returns to help you track your investment's success.

Additional Read: How to Invest in Mutual Funds?

Over to you

Are you looking for a sought-after financial institution to help you create your MF portfolio? If so, then rely on one of India's best – Tata Capital Moneyfy app. With our help and guidance, you can select and apply for MFs, systematic investment plans, and various other financial instruments.

So, what are you waiting for? Make us a part of your investment journey today!