How To Invest In Mutual Funds – A Step-By-Step Guide
by Arnab Dey Finance 23 June 2025
Among the various investment options in India, mutual funds are one of the most lucrative ones. They offer several benefits, including affordability, diversification opportunities, and easy accessibility.
They assist you in achieving long-term wealth growth, which you can find out using the mutual fund return calculator online. If you are new to the mutual fund world, this detailed guide will assist you in starting your journey smoothly.
However, if this is your first time, you might get overwhelmed navigating through the process. There are various things that you have to understand. But if you know the basics of how to invest in mutual funds, you are good to go.
Why Should You Invest In A Mutual Fund?
Investing in mutual funds is not a complicated process. It’s simpler than you think. Moreover, you can start with a small amount through a SIP (Systematic Investment Plan or you can invest in a one-time big amount.
Moreover, it is flexible. You can switch between finds or make some changes in the portfolio to align it with your goals. However, the best part about mutual funds is that you don’t have to be a market genius.
Also, it helps you reduce tax for specific financial instruments. These funds are managed by a professional fund manager along with a team of researchers. The fund manager prepares the investment strategy for the asset allocation.
How To Invest In Mutual Funds?
Investing in mutual funds for the first time? But, how to invest in mutual funds? Here is a simple guide to help you get through the process.
Step 1: KYC Documentation
The first step to your mutual fund investment journey is to complete your KYC documentation process. It is a one-time process that requires you to verify yourself and disclose your address proof. So, if you are a first-time investor, this process is a must.
Step 2: Choosing A Mutual Fund Scheme
This is the step where you have to pick a mutual fund scheme that aligns with your wealth and investment goals. Think of the three main attributes: the risk, expected return, and time. You can choose equity-based MF, debt MF, hybrid MF, etc.
Step 3: Choosing MF Investment Mode
Next, you must select a mutual fund vendor through whom you want to invest. Since there are plenty of options available, you must make a wise choice. You can invest through the following channels:
- Asset Management Company portals
- Registrar and Transfer Agent portals
- Distributor Websites
- Stockbrokers who are AMFI-registered agents.
Step 4: Apply For The Mutual Fund Scheme
Fill out the application form for mutual fund investment and provide accurate details. Your bank account details must be appropriately filled in, as the redemption proceeds will be sent there. You can also transact through the online portal or app of the asset management company.
Step 5: Make Payment
As the final step, you must make the payment towards the purchase of mutual funds either through a cheque or the online method.
Once you complete the payment process, the asset management company will generate a portfolio number with you and share the account statement, showing the details of all the transactions made during the given period.
You can also use the mutual fund return calculator to know your earnings and growth.
Important Things To Know Before Investing in Mutual Funds
- Set clear investment goals before purchasing mutual funds. Your goals can be retirement corpus, child education, down payment for housing, etc.
- Assess the financial risk that you can take. Assess the financial risk that you can take. You can opt for equity or debt mutual funds based on your risk appetite.
- Know the period for which you want to invest.
- Decide how much you want to invest in the funds based on your other financial commitments.
- Find out the liquidity of the fund that you want to invest in.
- Understand the tax implications of mutual funds, as capital gains on mutual funds are taxable.
Things To Consider For A First-Time Investor
If you are investing in mutual funds for the first time, there are certain things that you have to think about. It will help you get through the process better.
1. Set an Investment Goal
Defining the goal and the time period significantly affects your investments. This will help you decide how much you have to save for investing, and you have to invest depending on your risk profile.
2. Choose The Fund Type
For first-time investors, it is best to go for a debt or balanced fund as there is not much risk associated with this, and it has steady returns as well.
3. Pick One Mutual Fund
You have to analyse and compare different mutual funds in every category to choose the right one. Moreover, consider different factors like portfolio components, expense ratio, manager’s credentials, and assets under management.
4. Diversify Your Portfolio
Try to invest in different mutual funds to make the portfolio diverse and get risk-adjusted returns. If one mutual fund is not performing well, the others can make up for the loss.
5. Try SIPs
If you are investing in equity investments for the first time, it is better to invest in an SIP. This will help you spread the investment over time and invest in different markets.
6. Keep KYC Updated
You can’t invest in a mutual fund without completing the KYC process. This is a government regulation for financial transactions to identify the source of funds.
When Are You Investing?
Mutual funds are a good channel to grow your wealth. However, you should plan the investment strategically and make decisions keeping everything in mind. This simple step-by-step guide is the answer to how to invest in mutual funds.
You can make use of plenty of online tools to simplify the investment, one of which is the mutual fund return calculator.
Remember, each investor’s journey is unique, and so are their requirements. Therefore, it is best to seek professional advice to understand and manage your portfolio effectively, achieving your long-term financial goals.
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