Over the past three and a half years, with every workshop that we’ve conducted, we’ve noticed that the process of investing is daunting and cumbersome for many attendees. What website or app should one use, how does one pick the right fund, what exactly is the step-by-step to-do list one should follow to start that SIP. This how-to of investing is what we want to simplify today.
First things first: Why do we postpone the how?
Understanding why we tend to postpone a new, seemingly complex task will help us overcome this hurdle.
Too many choices cause confusion
All too often we hear people say that it’s because there are way too many funds to choose from. It becomes hard to pick the right one. To this, I would say that knowing your financial goals, or even just the time horizon for your investments (long term, medium term, or short term) will help you zero-in on the type of mutual fund you should opt for. Once you’ve done this, use a website like Value Research to pick a top-rated fund. Then just forget about it for a while. There is no need to check on the fund every day. Once a quarter is a good enough frequency to review fund performance.
The misconception that mutual funds are illiquid
Many a times, we postpone investing simply because when the money is lying in one’s savings bank account, it feels easier to access. So, investing in mutual funds doesn’t appeal to someone who thinks they might need money at short notice.
While this is understandable, it is a myth that you cannot withdraw your money from a mutual fund quickly. It might amaze you to know that when you redeem your funds, the amount will get credited to your bank account within 2-4 days. Some liquid mutual funds get credited within 30 minutes of redemption! Although I don’t advise frequent withdrawals from your mutual funds, it is helpful to know these timelines. The fact is that mutual funds offer much more flexibility than Fixed Deposits and Recurring Deposits.
That dreaded disclaimer
Ever heard that disclaimer at the end of every mutual fund advertisement? It tends to scare people away. Many of us might be inherently risk averse. And the message that comes across to those of us who are, is that the stock markets are volatile, and we must stay away from them.
This disclaimer is something I vividly recall memorizing as a child, viewing it as a new tongue twister that needed mastering. I urge you to try looking at it the same way. Not as a warning in big bold letters flashing in your mind, but merely as a regulation set by SEBI and AMFI (Association of Mutual Funds in India).
Now that we’ve understood some of the major hinderances getting in our way of investing, we will be better equipped to tackle them.
Steps to Invest in Mutual Funds
- Check your KYC (Know Your Customer) Status on https://www.cvlkra.com/ > KYC Inquiry
- Apply for KYC if not registered by filling in this form and submitting it your nearest fund house – https://portal.amfiindia.com/spages/CKYC-KRA-KYC-FormforIndividuals.pdf
Alternatively, you could complete your KYC via one of the many aggregator mobile apps like Groww or Zerodha. - Pick a mutual fund based on your goals/investment horizon – Value Research Online
- Start an SIP either directly on the fund house website or via an aggregator app.
Third Party App or Mutual Fund Portal?
There is no clear winner here. Many investors have been used to investing in an age without aggregator apps. Many others find apps the more convenient way to go. Here are some of the pros and cons of using third-party apps for your investing journey.
Pros:
- Quick and simplified KYC process.
- One can invest in multiple fund houses from a single portal.
- These apps provide a dashboard that gives you a consolidated view of all your mutual fund investments in one place.
Cons:
- One-time charge for registering on the app. This usually ranges from ₹100-300.
- Sometimes, when redeeming your funds, you may encounter delays in receiving the money into your account. The usual timelines we discussed above might not always hold good. However, SEBI is issuing rules in this regard, to improve this aspect of the experience.
- Some apps only offer Regular Plans, not Direct Plans. This results in a slightly lower return on your investment. So, be mindful when selecting your third-party investing app.
Whether you choose a third party app or invest directly on a particular fund house website, know that not choosing either is still a choice that you’re making. It’s a choice not to invest at all.
Build the habit of investing, starting now
Michelle Obama, in her recent book, The Light We Carry, talks about being comfortably afraid. She says, “To me, the idea of being comfortably afraid is about taking a step back after seeing something that is scary or jarring to you and then thinking a little bit more critically about it. Maybe there isn’t a reason to be as frightened as you think there is. Maybe you hold more power than you think you do.”
Navigating the process of investing can indeed seem frightening. But taking action is the only thing that will help you overcome the fear and apprehension.
Don’t wait for a muhurat
Just two weeks ago, the market was at another all-time high. And now it’s declining. Does this change your stance on investing? No. Does it mean you should pause your ongoing SIPs? No.
As a long-term investor one must never worry about timing the market. Do not get perturbed by a rise or a fall. Simply ignore it and keep investing.
If you haven’t started your investment journey yet, the beginning of a new year can be the most motivating time to begin. When we’re young we often live by the concept of YOLO (You Only Live Once), thinking we have a lot of time ahead of us to start investing. What if we changed YOLO to YOYO – You’re Only Young Once. Acknowledge that postponing isn’t wise. Get comfortable with what is stopping you and take charge. Make the most of the early years of your career and give your portfolio a headstart.
If you already have your own SIPs running but know someone who should have started their investment journey by now, do share this with them. And if you would like to have a conversation about this or just need some help figuring your investments out, don’t hesitate to reach out to us.
