Before starting your mutual funds investment journey, you need to ask some important questions, to avoid issues at a later stage.
Mutual funds are a popular investment option in India. They are managed by asset management companies (AMCs) and pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets.
There are several types of mutual funds in India, including equity funds, debt funds, balanced funds, index funds, and sector-specific funds. Each type of fund has its own investment strategy and risk profile.
You can invest in mutual funds through a variety of channels, including online portals, mobile apps, and offline agents. You will need to complete the Know Your Customer (KYC) process and provide necessary documents such as PAN card, address proof, and bank details.
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However, before starting your mutual fund investment journey, you need to ask some important questions, to avoid issues at a later stage.
Among many initiatives for investors’ education, the Securities and Exchange Board of India has a reference guide for investors, which helps to inform an investor with a broad understanding of the subject.
Among many DOs and Don’ts created, here are a few listed below for your understanding before you begin your investment journey.
Ask yourself before you invest
- Why am I investing?
- How much do I want to invest?
- Where do I invest?
- If I don’t invest here, what are my opportunity losses?
- For how long do I want to invest?
- Is this the best investment for me?
- Does this investment match my investment objective?
- How much risk can I take?
- Am I ready to absorb losses, if it so happens?
- Will I be in a position to sell it whenever I want ?
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Ask yourself before investing in mutual funds
- What is the track record of this fund?
- What type of securities does the fund invest in ? How often is it disclosed?
- How often does it reshuffle its portfolio?
- Does this mutual fund invest in any type of securities that could erode my investment?
- How is the fund performing compared to other funds of the same type or to an index of the same type of investment?
- How much will the fund charge me when I buy units?
- What NAV would be applicable to me if I transact today?
- How much will the fund charge me when I sell units?
- How soon will I get paid for the units I sold?
- How often do I get my account statements from the fund ?
Ask your mutual fund agent / distributor
- Are you the Association of Mutual Funds in India (AMFI) registered agent?
- What mutual fund products do you distribute?
- Are there any products that you do not distribute?
- Why is that? Is it because the products are not suitable to your clients or are there other reasons such as low commission rates to you? If those products are suitable for me, can you still assist me in buying those products?
- How long have you/ your firm been in business?
- What training and experience do you have?
- Do you make more money if I buy this mutual fund rather than another? If you weren’t making extra money, would your recommendation still be the same?
- Is this purchase really in my best interest ?
