How to Invest in a Mutual Fund

Investing in mutual funds is a great way to earn higher returns on your funds. Understanding how the mutual fund market works and the key success factors for such investments can make sure that you keep your money safe.

It’s always a good idea to put in some research and find out which funds will best suit your financial goals. Go through the pros and cons of picking one over the other and select the most promising funds. Don’t forget to consider the costs associated with investing in different funds when comparing them. Once you are convinced about a particular fund, you can go ahead and buy some units depending on how much money you want to put in it.

If you have a large investment portfolio, you would probably have a portfolio manager who takes care of every little detail of your investments. If you don’t, then you have two options – go to a mutual fund company (like Fidelity or Vanguard) directly or try an online broker.

For most people, it makes sense to go for an online broker as it offers much more convenience than dealing separately with multiple mutual fund companies. A broker does not specialize in selling units of just one mutual fund. Instead, these companies have several schemes available through a single user interface.

You can invest in different funds and track them all in a single place. This works particularly well if you intend to make investments in different funds to construct a diversified portfolio. You would receive a single statement every month that shows the current balances and performance of each fund you have invested in. But you should know that all brokers charge a fee, which may apply to every transaction that you’ll make through that account.

The process for applying for purchase of units is quite similar in both cases. The first thing you need to do is open an account with the mutual fund company or the online broker. The next step is to link your bank account to facilitate easy money transfers to the investment account. You need to use the routing transit number and your account number to set-up third party transfers. It may take a few days for the accounts to be linked. You can then transfer money to invest in a particular fund by filling out a simple form with information like how much you want to invest and which fund you have selected.

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