For Beginners: Buying Mutual Funds made easy

If you are one among those who want to start investing in mutual funds and don't know whereto start from. Don't worry!. There are resources available for you to use and learn and start the process of educating yourself about mutual funds.


In the Indian context, for those who don't know anything about mutual funds, Value Research is a good site to learn the very basics of mutual funds. The site has a lot of information presented fairly simply for all. Even those who don't any background in finance can understand the information easily.

One you know the basics of mutual funds, then comes the issue of putting some money into a mutual fund. Reading is easy but putting real money into mutual finds can be a bit nerve wracking as one is not sure as to how to go about it.

While those starting of with mutual funds need to be comfortable with what they do, I would suggest that beginners start of with the following baby steps

1. Make your first investment in mutual funds with the aim of learning about them and not losing money and at the same time making some money. You can make money once you are an expert with mutual funds
2. Start investing in an open ended equity diversified fund.Since this is about learning, it is good to start of with a basic mutual fund type.
3. Start a 12 month systematic investment plan (SIP). Start the SIP with a monthly investment of Rs 1,000 (more if your want to, remember this is a hands on learning exercise aimed at giving you real learning about mutual funds)
4. Now comes the real part of identifying the actual fund in which to invest in. An easy way to start would be to shortlist the good performing funds who have given returns over the long term. The way to do it would be to use Value Research's fund selector and to select open ended equity funds with a five star rating who have given good returns in the last 5 years. 

Once you have a shortlist of few funds, you can do your homework on the funds and come towards finalizing a fund to invest in.  Hopefully if you select one among the top funds, chance of going wrong will reduce. Additionally, if you are investing monthly over a one year period, the chances of the SIP taking care of market fluctuations will also help you doing decently well.

Again, the objective is to start a low risk learning exercise which will help you gain hands on expertise with mutual funds. As you go long and are more experienced with mutual funds you could surely come up with approaches to make lots of money with mutual funds.