Frequently Asked Questions on Mutual Funds

There are there different ways of how to invest in mutual funds.

• You can invest through a brokerage firm offering mutual fund accounts
• You can invest through banks offering mutual fund accounts
• You can also buy mutual funds directly from the asset management company's website.

Here are some tips to help you select the best mutual funds.

• Consider your preferred investment horizon, i.e., the duration you would like to stay invested in a mutual fund scheme. It helps to stay invested for the medium or long term to get higher returns on investment.
• Choose mutual fund schemes based on your investment objectives or goals. For instance, if you are looking for growth, you can opt for equity funds. Whereas, if you are looking for regular income, debt funds would be better suited.
• Evaluate your risk profile before investing. If you are risk-averse, then debt funds are ideal. If you are comfortable taking risks to earn higher returns, equity funds are for you. You can also invest in Hybrid funds to balance your risk-to-returns ratio.
• Choose SIP if you prefer to invest in instalments without having to time the market. If you have a corpus of funds ready to invest, you can go for lumpsum payments.
• Evaluate the track record of the fund manager and the mutual fund itself. Consider factors like past performance, decisions taken during volatile market cycles, etc.
• Look for a mutual fund with minimal expenses so that you do not end up losing your profits in fund manager's commissions, expense ratios, etc.

Here are five tips that can help you choose the best equity mutual funds.

• Choose a mutual fund based on your risk appetite. Equity Mutual funds can generate significantly higher returns. However, they involve high risks, so ensure you consider your risk appetite before investing.
• Go for mutual funds that are in line with your investment horizon. If you are in it for the long run, equity mutual funds are a better option. They may be slightly volatile, but the risk is ironed out if you stay invested for extended periods, say five years or more.
• Choose funds based on your financial goals. Define your financial goals over the short and long term and choose securities accordingly.
• Remember to choose equity mutual fund schemes after carefully comparing the fees and commissions involved. It's always advisable to opt for a mutual fund with lower charges. This ensures that more of your money is invested, and you get more bang for your buck.
• Look at the past performance of the various equity mutual fund schemes before settling on one. It is always favourable to opt for a fund that's been performing well historically.

ELSS is short for Equity Linked Saving Scheme. These mutual funds invest up 80% of assets in equities, while the remaining funds may be invested in balanced or debt funds. ELSS are widely known as tax-saving mutual funds as they qualify for tax deductions of up to INR 150,000 under Section 80C of the Income Tax Act, 1961.

The process of how to invest in ELSS is simple. Simply log in to your Mirae Asset Trading Account and choose from a wide range of ELSS securities under the Mutual Funds section. Check the past performance of ELSS funds, choose your preferred investment method (lumpsum or SIP) and make your investment. Remember that ELSS comes with a 3-year lock-in period, so if you opt for SIP, each SIP instalment must be locked away for three years to avail of the tax benefit.

The advantages of mutual funds are as below:

• Liquidity: You can redeem your mutual units at any point in time. This can be helpful in case of a sudden cash crunch or financial emergency.
• Diversification: Mutual funds offer a great deal of diversification and are thus less volatile. Your money is invested across multiple securities, thereby safeguarding you against sudden market fluctuations.
• Expert management: MFs are ideal for newer investors as an expert fund manager takes all the investment strategies and decisions. This ensures that your money is well invested, even if you have little or no market knowledge.
• Flexibility: You can choose how much you want to invest and how often, thanks to SIP and lumpsum investment methods.
• Accessibility: Investing in mutual funds is extremely easy! For instance, with Mirae Asset, you can sign-up and start investing in as little as 5 minutes^**.
• Suited for every financial goal: You can invest in various mutual fund schemes to achieve different financial goals. You can also choose varying schemes with varying investments tuned to your individual risk profile.
• Safe & transparent: As per the latest SEBI guidelines, all mutual funds must be labelled according to their risk levels. You can choose funds based on their star ratings and invest in the best schemes.
• Tax benefits: ELSS mutual funds offer you tax benefits of up to INR 150,000 under Section 80C of the Income Tax Act of India, 1961. This benefit allows you to reduce your taxable income.

There are several ways to optimise mutual fund returns as under:

• Always opt for direct funds over regular MFs. These plans generally fetch you 1% to 1.5% higher returns as compared to regular mutual funds. This is because you avoid paying any fees or commission, resulting in more of your money being invested.
• Opt for SIPs over lumpsum investments. This allows you to start small, slowly increase your investments over time and reap the benefits of compounding interest.
• It is also wise to diversify your investments. This ensures that your losses, if any, are kept to a minimum in case of any market fluctuations.

It would help if you looked for the following factors while choosing the best mutual funds in India.

• The funds' performance and returns generated over the last 1, 3, 5 and 10 years.
• Whether the fund demonstrated stability or volatility during different market cycles
• The performance of the fund manager handling the funds and whether the funds' value has grown or fallen during their management.
• The asset allocation of funds and whether it suits your investment style and risks.