Read the Advisory Warning on Investing in Mutual Funds for BeginnersDisclaimer: I am not a financial expert and not even close to it. All of these information is consolidated and balanced to give an overview of finance and savings to make people like you and me, financially literate. Whatever issues and mistakes are there, kindly point them out and let me know by email, twitter or FB. I will try to add as much sources as possible. If anything is missed, kindly let me know.
Advice: I have read many questions and answers in Quora, telegram channels, and what not. Most of these advises from share market gurus are to make money for them and not for you. Never trust anyone with your money and whatever decisions you take should be backed up with research and not rumors. Otherwise you will lose all the money for sure. DO NOT SPEND MORE THAN WHAT YOU CAN HANDLE. Avoid Greed, when it kicks out say this statement to yourselves; "Mutual fund investments are subject to market risks."
Note: This is a long consolidated post with information from many sources. Read or not read fully is your choice. This will help you for sure. I will adding more information as my journey with Mutual funds evolves.
What are Recommended Actions to be Taken Before Investing in Mutual FundsBefore starting out SIPs, STPs and other investments in Mutual Funds, do the following first.
1. Create an emergency corpus - Emergency fund should be your 6 months salary.
2. Purchase adequate term plan if you have dependents - Term plan is only one claim during the term of policy or no claim at all. Term Plan must be at least 15-17 times of your yearly income or 500 times of your mothly expanse. Review the cover amount at own marriage, and at every child's birth, as well as for home loan. Generally Bank fd rate is 6.5%, so your family can deposit that money in the account.
3. Purchase adequate health cover - Health Policy can be like no claim for few years, then claims, no claims, claims, no claims and so on, till your death - Best Family Health Insurance Plans in 2018
4. Identify your future goals - Checked.
Now start thinking about mutual fund.
Systematic Investment Plan [SIP]
You can use a SIP calculator to find out the return you will get at the end of the period. Use SIP calculator of valueresearchonline. Go to teh website, select fund and scroll down below to see the SIP calc. Select MF house and the fund and start calculating.
Systematic Transfer Plan [STP]
Systematic Withdrawal Plan [SWP]
Know Your Customer [KYC] and Electronic Know Your Customer [eKYC]The first step in order to invest in Mutual fund is to create an account. In order to create an account, you need to do a KYC or verify your identity as a customer. There are two ways of doing it.
1. Go to any Mutual Fund houses or AMCs and fill the KYC form and submit all related documents.
2. Go to CAMS / KARVY website and do eKYC using AADHAR.
Quick links of RTAs to link AADHAAR to your Mutual funds
CAMS - Link AADHAR
KARVY - Common Aadhaar linking across Karvy Serviced Mutual Funds / AIF - Submit Before 31st March 2018 to avoid freeze of MF folios
FRANKLIN TEMPLETON - AADHAAR NUMBER LINKING WITH FRANKLIN TEMPLETON INVESTMENTS
SUNDARAM BNP PARIBAS FUND SERVICES LIMITED - Fund Services
CAMS manages 13 AMcs.
- Birla SunLife.
- DSP Black Rock.
- HDFC Mutual Fund.
- ICICI-Prudential Mutual Fund.
- IDFC Mutual Fund.
- IIFL Mutual Fund.
- Kotak Mahindra
- Mahindra Mutual Fund
- PPFAS Mutual fund.
- Tata Mutual Funds.
- Union Mutual Funds
Other Direct mutual fund portals are Kuvera, Investza, Mymoneysage, Jama, Wealth Trust.
I went and did eKYC in SBIMF and later HDFC MF and dsp blackrock automatically fetched the information. For investingin HDFC or CAMS you need to have a cancelled cheque.
What Type of Fund I should Invest in Mutual Funds for Beginners?
Dividends - They are parts of profit generated by the company. The profit is divided as per the number of shares the company has and distributed to share holders. This means the company will pay you a sum of amount every year. This your returns. Eg: With Five lakhs investment over a period of 5 years, with 12% minimum interest, you will get 6661 Rs per month as dividend.
Growth - They are dividends generated from the shares which are automatically reinserted as investment. The money that the company pay you as dividends are used to buy more shares. This will increase your NAV.
In direct plans, you are saving the money increasing your NAV. Always opt for direct plans.
Open ended fund - In open ended fund you can close, switch funds anytime.
Close Ended Fund - In closed ended fund, there will be lock out period and the mutual fund house may charge exit and entry charges.
Consistent Past Returns - Check the consistent returns given by the funds to the investors. That way you can see the performance of the fund. Following is an example of the returns given by some funds in the previous years.
You should go for Open Ended Direct Growth Fund that provided good consistent returns in the past.
How often you track your mutual fund portfolio? (Tracking does not means reviewing)You should be checking daily gains/NAV, XIRR, Absolute returns, etc. at least per month.
How to Get a List of Mutual Funds and their Returns in a five year periodFreefincal has created an amazing excel template consist of all the mutual funds and their returns of a five year period. This template can be used as Mutual Fund screener for beginners
How to Create an Experimental Portfolio in ValueResearchOnline
MUTUAL FUND TERMS EXPLAINEDAMC - Asset Management Company
SBI Mutual Funds, Aditya birla are some Asset management Companies. You can also call them Mutual Fund Houses [MF houses].
RTA - Registrar and Transfer Agents
NAV = (assets - liabilities) / number of outstanding shares
MUTUAL FUND RESOURCES
1. Money control - Provide Live Stock Price, Stock Trading news, Live CNBC TV18, Share Market, Views and Analysis on Equity and Stock Markets Tips etc.
2. Value Research Online - Share analysis on each mutual fund and gives a rating.
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