Are Mutual Funds for Beginners?

If you’re a new investor, you may find investing to be complex and may be unsure of where to begin. With the amount of information available online, you don’t know which options are suitable for you. With limited knowledge on investments, you turn to your friends and family and you get conflicting advice. And then you hear about mutual funds for beginners. And back to square one, you don’t know if they’re right for you and where to start. In this guide, we will assess whether it is viable to invest in mutual funds as a beginner. Let’s start with how mutual funds work.

How do Mutual Funds Work?

A mutual fund pools money from a large number of investors and then invests the money on their behalf with the goal of gaining positive investment returns. A mutual fund is run by professional fund managers who are experts at investing within the umbrella of an asset management company. There are many different kinds of mutual funds. They can invest in equities (also known as stocks of a company), bonds (bonds are essentially loans taken by the government or a company on which interest is paid), or they can invest in commodities or precious metals (such as gold and agricultural products). You can invest in a mutual fund through the website or app of the mutual fund house/asset management company (AMC), such as Axis Mutual Fund Invest app, brokerages, mutual fund distributors, or even your bank.

Are Mutual Funds Suitable for Beginners?

Mutual funds can be suitable for beginners for the following reasons: - Professional Management – You don’t have to worry about handpicking the securities to invest your money in. You can rely on the professional expertise of the fund manager who will invest the money on your behalf. The goal of the fund manager is not only to maximize returns, but also to protect against risk. - High Diversification – In most cases, a mutual fund will invest in a large and diverse basket of securities. For example, a large cap mutual fund will invest in numerous different large companies. Because mutual funds invest in many different securities, the low performance of some securities may be mitigated by those securities that perform well at a given point in time. - Low Cost of Entry – You don’t need to invest lakhs. In India, you can start investing in mutual funds with an SIP as low as Rs. 100 (https://www.axismf.com/sip). The primary benefit of investing is that it allows your money to potentially compound growth over time. A small monthly amount can become significant over decades. - Different Options for Different Needs – Mutual funds come with different risk levels and objectives that may suit varied needs of investor profiles.

How to Begin Investing in Mutual Funds?

Starting to invest in mutual funds is simple, and it’s best to start as early as possible with small amounts. While investing, always remember to be aware of how much risk you can take and only invest according to your own risk profile. Do note the following when you start:

• Consider Your Finances – Before starting to invest, it’s important to be mindful of your income and expenses and assess how much money you can set aside for investing.
• Plan Your Financial Goals – Consider your long- and short-term financial goals. Your future goals may include purchasing a house, having children, a comfortable retirement, and so on. It’s important to align your monthly savings with your future financial goals.
• Choose a Mutual Fund – Once you are aware of your financial goals, you are prepared to choose a mutual fund or a combination of mutual funds to help you reach your financial goals. Different mutual funds have different return/risk profiles and are suitable for different time horizons. For example, a debt mutual fund can be more suitable for short-term investment compared to an equity mutual fund.

Wrapping Up

It’s not necessary to know everything about investing before starting and mutual funds can be your seamless gateway to the world of investments. You can refine your investing process over the years, as you become more aware of the investing landscape.

There are many types of mutual funds that are suitable for beginners, and you can start your investing journey by investing in those. As these funds are managed by professional fund managers and also well-regulated by SEBI, you can be assured that the mutual fund will take steps to ensure transparency while following the said objectives.

Statutory Details: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.This article represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

Views and opinions contained herein are for information purposes only and should not be construed as investment advice/ recommendation to any party or solicitation to buy, sale or hold any security or to adopt any investment strategy. It does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Axis MF/AMC is not guaranteeing/assuring any returns on investments. The recipient should exercise due caution and/ or seek professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.