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Here's a checklist to keep in mind when you invest in mutual funds

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Created on
July 8, 2022


What’s Inside

With a plethora of mutual funds to choose from, selecting the right one can feel overwhelming. However, understanding the nuances and debunking myths surrounding mutual funds is the first step towards confident investing.

In this blog, we'll unravel complexities, offer practical tips, and provide essential insights to help you navigate the world of mutual funds and make informed investment decisions for your financial future and help you when it comes to choosing the right mutual fund.

Investing - the silver fruit of money

With savings account that only give between 2.5% -  3.5% interest rate and booming inflation rates, the future looks bleak.

However, this is where investing can help. By putting money into asset classes that have the potential to grow faster over time, one can stand a chance to receive returns that are higher than what a bank account gives and stay ahead of inflation. The thing is, with investing, you give your money a chance to grow, in turn creating wealth, which is the purpose of investing. 

Have a clear goal

Irrespective of the asset classes available, all of them will work only if you know what you want out of them. In other words, have a goal to achieve when you invest. 

How would you feel if you sat in a car without knowing where to go? Investing is the same. Setting up an investment objective helps keep you on track.

And there are different types of mutual funds for different goals. I invest in having enough when I retire. So I choose passive funds that will only show returns over a long period of time. Similarly, others will have different goals, for instance, studying abroad, buying a house or for the future of their children, the list is endless.

A quick check is to ensure your goal follows the SMART matrix - Specific, Measurable, Achievable, Realistic, and Time-bound. 

Understand your risk appetite

Though investing has the potential to generate high returns over a period of time, it comes with certain risks. They are two sides of the same coin. So it’s essential to know how much risk you’re willing to take with your investments.

A good way to check is by getting your risk profiling done online. This gives you clarity on the type of investor you are. Based on that, there are three types of mutual funds

Low risk

These funds carry minimal risk and provide more or less stable returns. Investments are primarily restricted to real estate, government securities and other debt instruments that stay ahead of inflation.

Medium risk

These funds have slightly higher exposure to equity funds, which increases the risk, but the returns are also better than low-risk funds.

High risk 

Suitable for those who like taking risks and can bear the brunt of losses in their investment. However, the returns are also very high. It is advised to regularly review the performance of these funds since they are highly susceptible to market volatility.

Is it safe to invest in mutual funds?

In investing, especially in mutual funds, you’ll definitely hear, “more the risk, more the return”. In this case, risk pertains to the possibility of losing capital or swings and fluctuations in investment value.

While evaluating mutual fund schemes, it’s obvious to see the returns you will get on your investment, but it’s equally if not more important to see the risk associated with that particular fund. While equity funds are the riskiest ones, liquid funds are the safest investments but still do contain some risk, although not as much as equity.

Remember, just investing in equity will not guarantee you higher returns. As per my profile, I am a medium risk-taker, so I choose to invest in index funds (a passive fund that looks to replicate returns similar to indices like Sensex or Nifty). So, while choosing the funds to invest in, make sure you consider the risks involved as each type of mutual fund has different risks associated with them.

Choosing how to invest - SIP or Lumpsum

Apart from various mutual funds available, you also have a choice whether you want to invest a fixed amount once or systematically over a period of time.

SIPs or Systematic Investment Plans allow you to invest regularly in a mutual fund scheme which can be done daily, weekly, monthly or half yearly, depending on your preference. On the other hand, lump-sum is a one-time bulk investment. Below is a brief comparison of the two

Another benefit of opting for SIPs is that it inculcates a sense of saving as a fixed amount goes into your investments and banks also offer to set up automatic investment instructions per your convenience. You can set it up and forget about it.

Check out this short video that summarises what to keep in mind and how to choose a mutual fund: https://www.youtube.com/shorts/ki6Y8kLaiRQ


In conclusion, investing in mutual funds can be a fruitful endeavor, offering the potential for higher returns and long-term wealth creation. By understanding your investment goals, assessing your risk appetite, and conducting thorough research on different types of funds, you can make informed decisions to align your investments with your financial objectives. Whether you choose systematic investment plans (SIPs) or lump-sum investments, the key is to stay disciplined and monitor your investments regularly to maximise their potential. With the right approach, mutual funds can serve as valuable tools on your journey towards financial prosperity.

Mutual Fund investments on Fi are commission-free. With its intuitive user interface, suited for novice & seasoned investors, you can select from over 900 direct Mutual Funds. Plus, Fi's 100% secure as it functions under the guidance of epiFi Wealth, a SEBI-registered investment advisor. To help simplify the steps involved, you can invest daily, weekly, or monthly via automatic payments or SIPs — created with one screen tap. Moreover, Fi offers 100% flexibility with zero penalties for missed payments. 

Frequently Asked Questions

What is the 90% rule for mutual funds?

The 90/10 rule is a comment made by Warren Buffett with regard to asset allocation. According to this rule one should invest 90% of one's investment capital towards low-cost stock-based index funds and the remainder 10% to short-term government bonds.

What do you need to check before investing in mutual funds?

Keep these factors in mind before investing in mutual funds:

  • Investment goals
  • Time
  • Risk tolerance
  • Fund performance
  • Net asset value
  • AMC performance
  • Expense ratio
  • Exit load

What is the 15 15 15 rule when investing in mutual funds?

It is one of the most basic rules that can help and investor make money. According to this rule, if you invest ₹15,000 a month for a period of 15 years in a stock that is capable of offering 15%returns p.a. you will make a total of ₹1,00,27,601 at the end of 15 years.

Which type of mutual fund is best for beginners?

For beginners, index funds or balanced funds can be a good choice. Index funds offer broad market exposure with lower costs, while balanced funds provide a mix of stocks and bonds for a balanced risk-reward profile, offering a simpler and diversified investment option for newcomers.

How do I choose the right mutual fund?

When choosing a mutual fund, consider the following:

  1. Determine your investment goals and risk tolerance to align with a fund's objective and asset allocation.
  2. Evaluate the fund's performance track record, expenses, and fees, ensuring they align with your investment strategy.
  3. Conduct thorough research, consider expert opinions, and compare various funds to make an informed decision based on your financial objectives and investment horizon.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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