Mutual Funds for Beginners | How to pick your first mutual fund | Investment Tips - YouTube

So after all the research for where to invest your money, you zeroed-in on Mutual Funds.

You are all set to invest.

But like many of us, you may be wondering how to choose the first investment…..

Today, we are going to help you.

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So, how should you choose your first fund?

The good part about Mutual Funds is that they offer scheme categories that match almost

every risk appetite & time horizon.

So let us take a look at some of the fund categories that could match your requirements:

Funds for investments up to 1 year If you are investing for say, 1 week to 1

year, you have to stick to Debt Schemes.

And specifically, don’t go beyond these 5 categories -

Overnight Funds - when your horizon is for up to 1 week.

Liquid Funds - When you are looking to invest for 1 week to 1 month

Ultra Short Duration: for 1 to 3-month investment Low Duration Funds: for 3 to 6 month investment

and Money Market Funds: for your investment that

you can do for 6 months to 1 year All these Scheme Categories are a far better

alternatives for the same duration’s FDs that you would get in a bank.

Funds for 1-2 year investment horizon For this investment duration too, you should

stick to Debt Funds.

Short Term Debt Funds can be a good category for this

These funds mostly lend to good companies for a period of 1 to 3 years.

if you complete 3 years they tend to deliver much better returns than Bank Fixed Deposits

as you would pay far lower effective tax on your returns than what

you pay on the interest you receive on FDs.

Funds for 2-3 year investment horizon From debt funds, you can go for Banking and

PSU Debt Funds These funds lend only to banks and public

sector companies These companies have good credit rating & hence

the risk is controlled even if money is lent for a couple of years or more.

Hybrid Scheme category that suits a 2-3 year horizon is Equity Savings Funds

These funds put around 30-35% in stocks, 30-35% in equity securities that offer arbitrage

opportunities, while the remaining is invested in debt.

Equity offers growth potential while debt adds stability.

The arbitrage part is more or less risk-free as it buys and sells the stock at the same

time to take advantage of different prices of the same stocks in different markets.

Funds for 3-4-year investment duration ELSS Funds

If you can lock-in your money for 3 years, you should go for ELSS funds.

These funds have an added advantage of helping you save up to Rs. 46,800 in taxes every year,

plus you get the growth potential of equities.

Dynamic Asset Allocation Funds These are hybrid funds buy stocks at low prices

& sell automatically when the prices rise.

These funds keep changing the allocation to stocks & debt to generate optimal return & minimize risk.

Funds for 4-5 year investment duration Aggressive Hybrid Equity Funds -

If you want to control risk, go for Aggressive Hybrid Equity Funds.

They invest 65% -80% of your money into equity and 20%-35% of the money in debt.

This is the ideal category for long-term investments for every first-time investor.

Large-Cap funds Another category for your 4-5 year horizon

is Large Cap Equity Mutual Funds.

They invest in the Top 100 companies, some of whom are most loved brands like, HDFC Bank,

SBI, Hindustan Unilever or Reliance Industries, etc.

These funds provide relatively stable returns and are not as volatile as other equity fund categories.

Multi cap funds A slightly aggressive cousin of Large Cap

Mutual Funds, they follow a Diversified Portfolio strategy that gives your money exposure in

companies of all sizes, across sectors.

Funds for 5-7 year investment duration Large and Mid cap

These funds invest in a combination of India's biggest and India's fastest-growing mid-sized companies,

giving you a mix of growth and stability.

Mid Cap Funds These funds invest in mid-sized companies in India.

The companies in this space are some of the fastest-growing companies.

For this reason, you can get market-beating returns.

However, they can be volatile in the short to medium duration

Funds for 7+ year investment horizon Small Cap Funds

These funds invest in the smallest companies in India

These companies have the potential to become mid and even large companies in the future

and can give outstanding returns in this journey.

However, this space is extremely volatile, so you need to be prepared.

Now that you know how to pick your first fund, time to get started on your investment journey.

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