Check out what you should ask before investing in mutual funds
Before starting your mutual fund investment journey, you need to ask some important questions to avoid problems later.
Mutual funds are a popular investment option in India. They are managed by asset management companies (AMCs) and pool funds from multiple investors to invest in a diversified portfolio of stocks, bonds or other assets.
There are many types of mutual funds in India, which include 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 various 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.
However, before starting your mutual fund investment journey, you need to ask some important questions to avoid problems later.
Among several initiatives for investor education, the Securities and Exchange Board of India has a reference guide for investors, which helps inform an investor with a comprehensive understanding of the subject.
Read also: New to Mutual Funds? Know these conditions before investing
Amidst the do’s and don’ts, listed here are a few for your understanding before starting your investment journey.
Ask yourself before investing
- Why am I investing?
- How much do I want to invest?
- Where do I invest?
- If I don’t invest here, what are my opportunities lost?
- 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 prepared to bear the loss if this happens?
- Am I in a position to sell it whenever I want?
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 does it appear?
- How often does it shuffle its portfolio?
- Does this mutual fund invest in any type of securities which can liquidate my investment?
- How is the fund performing in comparison to other similar funds or an index of similar investments?
- 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 the units?
- How soon will I get paid for the units sold?
- How often do I get my account statements from the Fund?
Ask your Mutual Fund Agent/Distributor
- Are you a registered agent of Association of Mutual Funds in India (AMFI)?
- Which mutual fund products do you distribute?
- Are there any products that you do not distribute?
- Why so? Is it because the products are not a good fit for your customers or are there other reasons such as low commission rates for you? If those products are suitable for me, can you still help me buy 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 instead of any other mutual fund? If you weren’t making the extra money, would your recommendation still be the same?
- Is this purchase really in my best interest?
,View SEBI’s Complete Reference Guide Here,
An investor must remember that mutual funds are subject to market risks. The value of your investment may go up or down depending on the market conditions. However, mutual funds offer higher return potential than traditional savings options such as bank deposits.
It is important to do your own research and consult a financial advisor before investing in Mutual Funds. Make sure you understand the risks and fees involved, and choose funds that align with your investment goals and risk appetite.
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