Do you have excess of cash lying around? Do you keep this sum of money idle in your bank savings account? Or do you choose to invest it in different types of investments that have the possibility to provide a higher rate of returns than the traditional bank savings account. One such type of investment is mutual fund investment. An investor is offered with different types of mutual funds that can help them achieve their different investment needs such as wealth creation, safeguarding capital, tax-saving, etc. So, if you are looking to park your money for a short period of time, you can consider investing in money market instruments or liquid funds that offer a higher rate of interest than savings account. Now that you are clear on where to park your money for a short duration, are you aware of how to invest in mutual funds? In this article, we will understand how you can invest your excess savings in mutual fund investments. Even if you already know how to invest in mutual funds, this article can serve as a good revision to you, so keep reading.
How to invest in mutual funds?
Before you begin your investment journey in mutual fund investments, you must do the necessary research to understand the apt AMC (asset management company) and type of investment where you wish to invest your excess sum of money. A professional such as financial advisor or mutual fund expert can help you make the right investment decision if you are unsure about the same. You can decide to invest in mutual funds online through a third party or directly through an online investment portfolio. You can also invest in mutual funds offline by filing out a buying form. An investor must be cautious that certain AMCs or fund houses require an investor to invest a higher amount in liquid mutual funds.
Expenses linked with mutual fund investments
It is very important for an investor to understand all the costs linked with mutual fund investments. All investors are required to pay a small fee to the fund house for the professional management they offer to investors. All mutual fund schemes have a varying rate of expense ratio. The higher the expense ratio of a mutual fund scheme, lower would be the net returns earned by that particular mutual fund scheme. Typically, the total expense ratio (TER) on liquid mutual funds is topped at 1.05%.
An investor needs to place a redemption request with their AMC when they wish to redeem their mutual fund investments. They can either do this online from anywhere in the world or by physically filling a redemption form with the branch office of the fund house. Additionally, liquid funds do not charge ant exit load fees to investors given that they stay invested at least for 7 days. Liquid funds are highly liquid in nature – the proceeds from the liquid mutual funds will get credited in the bank accounts of the investors withing 1 or 2 working days from the time of withdrawing the funds. Hopefully, this article will help you invest in mutual funds in a better way. Happy investing!