Mutual Funds For Beginners: Which Funds Are Suitable To Start Your First SIP?

Beginner investors take their first steps toward personal finance, and these investors often seek high returns at low risk. Before making a choice, make sure you know how much risk you are okay with. Financial objectives, budget, risk tolerance and time horizon all have a significant impact on how to approach investing for personal finance. And when it comes to investment advice for newbies, mutual funds are often the most popular choice because they not only have a history of delivering higher returns than other instruments, but they offer a variety of investment options with added benefits to inexperienced investors. Also enable you to choose between funds. portfolio diversification.

Based on an exclusive interview with Kavita Krishnan, Senior Analyst-Manager Research, Morningstar India, the spokesperson said, “Mutual funds work well for first-time investors because they don’t need to see how it works. does. , An efficient fund manager invests money in a pool of stocks which are well researched. The goal of the manager is to generate positive returns for an investor while at the same time minimizing risks. There are other benefits as well – for example, first-time investors who want to start small can choose to invest a smaller amount and also go for the SIP route. This helps investors average their returns over a long period of time.

The following frequently asked questions for new mutual fund investors are based on our discussion with Kavitha Krishnan.

Which mutual fund category should I choose as a beginner? Please suggest as per your risk appetite of aggressive, moderate and conservative.

We generally recommend that first time investors build their portfolio with a focus on slightly lower risk. Balanced funds can give investors a taste of equity as well as debt, playing the role of basic asset allocation. Hence, investors need not think about how much equity and debt they want to have as part of their portfolio. However, if investors choose to split their asset allocation between equity and debt, we generally recommend 70% exposure to equity and 30% to debt for an aggressive investor. It is generally applicable for those who have high risk taking ability. For the moderate investor, we recommend that they bring the equity level down to 60%; for the more conservative investor, they can bring it down further to 50%, thus making a similar shift towards debt.

It is also important that the fund selection for first time investors is based on a combination of their long term goals, their investment horizon and their risk appetite. While all these factors may seem a bit overwhelming to a new investor, I would like to highlight the availability of educational material which is quite easily accessible to a first time investor. Most AMCs and fintech platforms provide reading material and training as part of their investor education initiatives that cover the basics and make investing easier for investors. Also, technology has made investing easier, especially now that everything is available on digital platforms. Investors can easily invest, monitor, redeem and switch their investments through digital mode.

What should be the ideal investment horizon for beginners?

At Morningstar, we always recommend that anyone looking to invest do so for the long term. The power of compounding is something only the patient investor can understand, and it is one of the most important factors to consider when investing. Often, we have seen that when investors see poor performance of a fund, they withdraw their investments in a hurry; Without actually evaluating the reasons for the poor performance of the fund. The opposite is also true, as investors rush to invest in a fund that is performing well for them. But both these types of investors often suffer losses – investors who choose to redeem when the market is down are likely to incur a mark-to-market loss in the process and are redeemed exactly as they are. Must have seen a change in the market cycle.

On the other hand, investors who rush into a fund that gives them blockbuster returns often end up witnessing a negative return simply because they joined the party a little late. We feel that timing the markets is not something that any investor can or should do, rather we would recommend that there is strong growth in average returns and growth in investor wealth. While the ancients mainly focused on wealth preservation, the current generation is also thinking about wealth creation, and investing requires maintaining a strict investment discipline.

How can senior citizens plan their retirement with mutual funds? Can you suggest some funds please?

The ideal asset allocation strategy for senior citizens is to focus on wealth preservation, rather than adding to their assets like the younger generations. Based on this, a major focus on debt funds is an idea to invest in them. Having said that, senior citizens may have different requirements, they can also opt for it if they want to earn consistent income from their investments. Schemes that pay dividends on an ongoing basis as opposed to reinvesting them. This will give timely returns to senior citizens, while also giving them an opportunity to preserve their capital.

In the mutual fund industry, these plans are known as dividend plans. It is important that the NAV and the total return of the Growth option will always be higher because of the dividends that are reinvested over time. But dividend payouts can prove useful for senior citizens. Mutual funds also allow investors to create more flexible withdrawal plans when needed and have more personalized and diversified portfolios than other financial products.


As with investing in individual stocks, stock prices, company fundamentals and market movements matter, with mutual funds, it is important that an investor chooses the right fund manager. Look for a manager who has a consistent long-term track record and who prefers to invest in a risk-averse strategy for the first time investor. While it is important to look at a fund’s past performance, it is also important to remember that past performance is not an indicator of what the fund is likely to do in the future. When it comes to the markets, it is important to remember that they are cyclical in nature. There is a high possibility that the top performing fund for one year may fall in the next year. Kavita Krishnan, Senior Analyst-Manager Research, Morningstar India, said, “When it comes to managing a fund, the manager’s consistent approach and their adherence to the fund’s philosophy is crucial.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.

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