BASICS YOU MUST KNOW BEFORE INVESTING IN MUTUAL FUNDS

If you have never invested in a mutual fund (MF) and you want to put the first sum of money into it, there are certain things you need to deal with.

Basic portfolio

Take a look at your existing investment portfolio and try to plug the essential gaps that a MF cannot fill. Do you have a Public Welfare Fund account? Possibly the best risk-free rate of return instrument, comes with a lock of 15 years. You can obtain a deduction benefit from section 80C income tax up to a maximum investment of Rs.1.5 lakh to year. Get adequate medical insurance and a term life insurance plan if you have dependents. Many investors who have not yet invested in Mutual Fund often have unit-linked insurance plans that they do not need. Now, there is no lock-in and delivery charge if withdraw after holding the policy for five years. Check the performance of your unit-linked insurance plan and make a decision if you want to withdraw and reinvest the proceeds in an mutual fund scheme.

Adviser

Unless you are well versed in mutula fund and you are comfortable deciphering schemes, you need a dealer or financial advisor to help you choose the right product. If you need someone to do the physical task of investing with minimal advice, then opt for a dealer. Generally, a dealer does not charge a fee,  if it does, it is a fixed charge of Rs.150. Your fund house will deduct this amount from your initial investment and pay you back.

However, if you want someone to make a holistic financial plan-account your inputs and outputs, restructure existing finances Read more...