March 2020 saw the worse of SENSEX and NIFTY, but the consistent growth after the fall has attracted many new investors into the mutual fund fold. The Sensex is up 125% as on Feb 2022, from March 2020 low.
The number of investor accounts have increased by 3.04 crore. In March 2020 total number of folios were 8.97 crore, it rose to 12.02 crore in December 2021.
But, Market volatility is a fixed event of the stock market, and one needs to be aware of the risks associated with it. Nevertheless Long term investors often make good returns with the help of right advice, research and discipline in their investment.
So, below are our tips for the new investors to Get started with Mutual Funds
- A Monthly Systematic Investment Plan (SIP)Â is the best option: SIP mode will ensure that the cost of buying Mutual fund units is averaged out. In an SIP mode, you buy small portion of units of a particular scheme on a fixed date of every month consistently over a period of at least 3 years. This systematic process ensures you buy units in both circumstances ie. Both when the market is high and low.
Past Data of last 20 years shows that anyone who has stayed invested through an SIP mode for more than 5 years has always made profits in Mutual Fund
- Stick with large caps: First-time investors can start with SIP in a Large Cap or Index Funds. Avoid or try to have less exposure to Small Cap Funds as they can be highly volatile and can make you panic.
The new Investors often lose money in market due to panic and lack of advice.
- Diversify Your portfolio: The Mutual funds are a great proxy to equity markets. New Investors should consider Asset allocation Funds, which invest in a mix of Equity, Debt, and Gold, which can provide better risk-adjusted returns.
Distribute your investment contribution between atleast 3 different schemes of different fund houses, this will ensure further diversification of risk.
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