Your first mutual fund is most important: Know these things before investing

Your first mutual fund should be simple and less risky in nature. As you would be new to the market, it will take time to understand the functioning, market moves, fundamental and technical aspects and some other important elements of the mutual fund. Pankaj Mathpal, MD, Optima Money Manager told Zee Business Online, ''Mutual fund as an investment tool is subject to market risk and investors should choose a simple and less volatile option. As he/she is investing for the first time, equity should be the first choice because of its return prospects. The first should be affordable or the amount that they can easily invest. While gradually one can diversify the portfolio and increase total investment.''

When beginners start investing in mutual funds, they expect quick returns, while one should always know that wealth takes times to multiply. Also, new investors usually invest in options like, bank deposits, PPF and other fixed-income investments. As equity is the best type of long-term investment, and mutual funds are the easiest and safest way to explore equity, one should choose first investment as an equity fund.

1. First fund:

"The new investor, who is not aware of the market behavior and sectors performance should primarily invest in Hybrid or Balanced advantage funds. These funds invest in both debt and equity but the good part is the ratio of division. The ration of investments into equity and debt is decided by the fund manager on the basis of performance and volatility, ensuring less risk and more returns to the investor,'' mentioned Mathpal.

2. Factors to keep in mind:

Deepesh Raghaw, Independent Investment Advisor added, ''There are a number of fund categories available and the investor should choose the best suitable for his style of investment. ''The other factors that the investor should determine before putting his/her money are selecting a fund category, return performance, expense ratio, alpha measure etc. Equity funds are comparatively decent to go with expert ratings for initial phases.''

3. It takes time to understand:

New investors would take time to understand the aspects of mutual funds. So it is always better to have patience, seek expert's advice. Also the first investment should be well within the financial appetite.