Mutual Funds
( Basic course on Mutual Funds(MFs) )

How should we invest in mutual funds? Should we just choose based on historical returns?
How a complete novice should start his investment in MFs with least prior knowledge? How does one choose best mutual fund to invest in?

Step A- In 4 easy step to understand mutual fund

Step 1- Some common terminology used in MFs

Step 2- Classification of MFs

Step 3- Risk calculation of MFs

Step 4- Return calculation of MFs
[see rolling returns for 5 years not just last year return]

Step B- To select best mutual fund in further 3 steps

Step 1 - Identifying goal, risk, time-horizon
Ex: you might have heard that for old age many people will give advise that they should invest in debt instrument and equity allocation should be very low. But if you add goal to this equation meaning, if invested amount is for children then they can invest with high equity allocation.

Step 2- Based on step-1, select MF category from classification of MF

Step 3- Making table and list down all the MF in that category with all the risk & return parameter- choose with max return and risk you prefer.

Note: This process is simplified and for beginners. If you are investing huge amount then read our advance section. But even in advance steps these above steps are mandatory.

Advance Step:

• Is it an active fund or passive fund?

• Past does not often repeat in Mutual fund

• Past performance of manager + fund house [manager with his team matters]

• Size of fund- too big MF is not good. How much big is too big?

• How mutual fund will behave in different market conditions.[look at the asset allocation of that mutual fund]

ETF is a type of security that tracks- index, sector, commodity or other asset. Click here for more

TIPs/Benefits-
1. When we want to invest in index but want lesser volatility or risk.
2. It is also an alternative way for retail investor to invest in index when we don't have large fund to invest in futures.

F&Q

1. How to check MF unit that we are holding?
   - When we invest in stocks, they show in our demat account and there we can check all the stocks we are holding.
   But that is not the case with MF.
   In this case, our investment is held by asset management company(AMC). AMC gives us folio number. And by inputing our folio number we can check our mutual funds details. 

2. How to pledge MF in India? Folio form vs Demat form in mutual funds?
   - We cannot pledge our mutual fund to exchange in folio form(by default- most mutual fund account have folio number).
   You have to approach your AMC to convert your mutual funds from folio form to demat form. To do that, you need to request CML form-client master list from your broker and fill all your details of mutual funds.
   Normally it takes 15-20 days to convert from folio form to demat form.
   One more thing, you can do is that while buying in new mutual funds check details that if it is possible to credit it to your demat account. Then, your mutual fund don't have to be in folio form.