How to Invest in Mutual Funds

You should have a mutual fund (MF) account to start making online investments. Investing via an INDmoney MF account is easy. Simply sign in to your account, choose the plan you require and enter the amount, complete the transaction by making payment, and you are done. You can later see that the amount is credited with the units in your chosen fund. Keep reading below to see how you can start your MF investments.

How to open mutual fund account?

To start a mutual fund investment, follow the below steps to create your free MF account:

Prepare documents:

• PAN Card
• Proof of address (Aadhaar card, driving licence, utility bill, or bank statement)
•  Cancelled cheque

Choose a platform:

Research and select a platform (mutual fund website, investment platform, or bank website), such as INDmoney that aligns with your needs and offers SIP/lumpsum options.

Complete KYC:

• Upload PAN card and Aadhaar card
• Finalise with a video call or image verification 

Steps to Start Investing in Mutual Funds

Don’t know how to invest in mutual funds using INDmoney, start your SIP by following the below steps: 

1. Download the INDmoney app
2. Open the app and use your mobile number to log in
3. Complete the KYC process
4. Select your mutual fund from INDmoney curated list
5. Choose from the option of SIP/lumpsum
6. Enter the amount you wish to invest
7. Complete the transaction 
8. Now you can see your mutual fund performance on your INDmoney dashboard

Choosing the Right Mutual Fund for Your Goals

Every individual is expecting something different from their investments, someone wants to buy a luxurious car, while other may be looking for a golden age saving. Let’s see how to invest in mutual funds for first-time as per your desired goals.

Car Purchase

For a car purchase, you can consider a short-term debt mutual fund that provides liquidity and returns with minimal risk. Some options include:

• Liquid Funds: These funds invest in short-term debt securities with maturities of up to 90 days, ensuring high liquidity and low risk.
• Money Market Funds: These funds invest in money market instruments like treasury bills, commercial papers, and certificates of deposit, providing a stable return with minimal risk.

Home Purchase

For a home purchase, you can consider a long-term debt mutual fund that provides steady returns and capital appreciation. Some options include:

• Long-term Debt Funds: These funds invest in long-term debt securities like government bonds and corporate bonds, providing a steady return and capital appreciation over a longer period.
• Hybrid Funds: These funds invest in a mix of debt and equity, offering a balance between stability and growth.

Child Education

For a child's education, you can consider a long-term equity mutual fund that provides capital appreciation and growth. Some options include:

• Equity Funds: These funds invest in stocks of companies with high growth potential, providing long-term capital appreciation and growth.
• Aggressive Hybrid Funds: These funds invest in a mix of debt and equity, offering a balance between stability and growth, making them suitable for long-term goals like education.

Retirement

For retirement, you can consider a long-term debt mutual fund that provides steady returns and capital preservation. Some options include:

• Long-term Debt Funds: These funds invest in long-term debt securities like government bonds and corporate bonds, providing a steady return and capital preservation over a longer period.
• Hybrid Funds: These funds invest in a mix of debt and equity, offering a balance between stability and growth, making them suitable for long-term goals like retirement.

Other Goals

For other goals like marriage, travel, or personal expenses, you can consider a short-term debt mutual fund that provides liquidity and returns with minimal risk. Some options include:

• Liquid Funds: These funds invest in short-term debt securities with maturities of up to 90 days, ensuring high liquidity and low risk.
• Money Market Funds: These funds invest in money market instruments like treasury bills, commercial papers, and certificates of deposit, providing a stable return with minimal risk.

Remember to assess your risk tolerance, investment horizon, and financial goals before choosing a mutual fund.

Tax Benefits on Mutual Funds

Investing in mutual funds can provide several tax benefits, making it an attractive option for investors. Here are some of the key tax benefits:

Long Term Capital Gains Tax

•  Tax rate: 10% for long term capital gains (LTCG) above ₹1 lakh
•  Exemptions: LTCG up to ₹1 lakh is exempt from tax
•  Indexation benefit: The cost of inflation is adjusted to reduce the taxable gain

Short Term Capital Gains Tax

•  Tax rate: 15% for short term capital gains (STCG) above ₹1 lakh
•  Exemptions: STCG up to ₹1 lakh is exempt from tax
•  Indexation benefit: The cost of inflation is adjusted to reduce the taxable gain

Dividend Distribution Tax (DDT)

• Tax rate: 10% for dividends distributed by mutual funds
• Exemptions: Dividends up to ₹5,000 per annum are exempt from tax

Tax on Interest Income

• Tax rate: 10% for interest income from fixed income securities
• Exemptions: Interest income up to ₹10,000 per annum is exempt from tax

Investing in mutual funds can provide several tax benefits, including long term capital gains tax, short term capital gains tax, dividend distribution tax, and tax on interest income. These tax benefits can help investors save on taxes and increase their returns.

Conclusion

Investing in mutual funds can be a beneficial way to grow your wealth and achieve your financial goals. By following the steps of how to invest in mutual funds online in India for beginners, you can create a mutual fund account online and carefully selecting the right asset class based on your risk tolerance and financial objectives, you can make informed investment decisions. Understanding the tax benefits associated with mutual funds is also crucial for maximizing your returns. Whether you choose regular or direct mutual funds, it's important to consider your individual investment preferences and know how to invest in mutual funds for long-term. With the right approach and thorough research, mutual fund investments can be a valuable addition to your overall financial plan.

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