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Gold has always been the safest option for investors. Over the last few years, gold has always reported a significant growth rate in prices. However, during the recent periods, gold has witnessed a fumble in prices. The pace in which gold prices has stumbled down during the recent times show us that we need to take a careful decision while choosing to invest in gold. The bottom line Due to the trends noticed in gold prices, <keyword id="6357979" type="UNKNOWN" weightage="20" keywordseo="mutual-funds">mutual funds</keyword> has once again come up in the chart as a preferred form of investment. One of the advantages of investing in mutual funds is that they mitigate risks by distributing the investment across a wide spectrum of industries. At the same time, unlike investing in gold, investing in mutual funds requires a great deal of planning and vigilance on the part of the investor. Here we discuss the various pros and cons of investing in gold and mutual funds to learn how to make the right decision. Risks involved Transporting and storing gold carries the risks of theft and burglary. However, this can be mitigated while investing in gold ETFs. Mutual funds do not present such risks. Mutual funds can be bought and sold safely online. Trading For buying and selling gold, you do not pay any charges. There is no documentation involved and there are no intermediaries required. The process of buying and selling mutual funds involves intermediaries, entry and exit charges and documentation. Gold investment cannot encash the highs that happen in the market. It does not earn anything to the investor periodically and it does not pay any dividends. Mutual funds ride both the bull and bear to fetch substantial returns to the investor. Variations There are no variants in gold accepting the quality standards like 24K gold and 22K gold. 24K gold is always expensive than 22K gold. Mutual funds have a lot of variants based on the kind of funds you choose. Hence it is very much essential that you choose the right option that will suit your investment hunger. Liquidity Gold investment is characterized by a high degree of liquidity. You can trade gold anywhere and anytime. Mutual funds also carry a considerable degree of liquidity as you can encash your mutual fund at the present Net Asset Value. However, you can sell them only in particular segments of the market. It is not possible to sell mutual funds to anyone and anywhere. Market knowledge You need not be vigilant or knowledgeable about the market when you invest in gold. Even a layman can invest in gold and get substantial returns if the investment is done over the long term. Mutual fund investment will demand that you remain on your toes all the time. If you want to make profits through mutual funds, you must be smart to respond to the trends in the money market. Stability Gold cannot resist the fluctuations in the market. Irrespective of the temporary fluctuations, the value of gold tends to go up in the long run. Mutual fund is a dynamic product that always rides on the highs and lows of the market and hence it can never be viewed as a stable avenue for investing. Conclusion Neither gold nor mutual funds is a clear winner. The decision to choose either gold or mutual funds must take into account the factors discussed above so that your investment serves its intended purpose.

Mutual Funds Vs Gold: which is better for Investment

After deciding between an advisor/distributor or investing directly with the mutual fund, you are ready to make your first investment. At this juncture, each of these parties provides a few options to carry your <keyword id="6362476" type="ORGANIZATION" weightage="20" keywordseo="investments">investments</keyword>, which are: 
· Paper application form &amp; cheque 
· Online investment accounts. 
 
To avail either of these options from both parties, you should follow the steps mentioned below. 
 
Option 1: Paper application form &amp; Cheque 
This is the traditional way of investing and the most common one too. For this you need to get yourself a form. If you are investing via advisor/distributor, they will provide you with a form, however, if you are investing directly via the mutual fund, you can download one from the mutual fund company’s website. 
 
Filling up the form: Please ensure that you fill the form correctly. When doing so, do pay special attention to: 
<ul>
	<li>
		Bank details</li>
	<li>
		Nominee details</li>
	<li>
		Mobile number: You will get an SMS confirmation of the transaction. The best and fastest way.</li>
	<li>
		E-mail: the mutual fund company will send you transaction confirmation as well as statements to this address. It’s best to fill it up in all caps</li>
</ul> Please also note that an "<keyword id="35471" type="ORGANIZATION" weightage="20" keywordseo="SIP">SIP</keyword>" form is different from the "one time investment" form as the former also contains an ECS Mandate allowing the <keyword id="6358378" type="CITY" weightage="20" keywordseo="AMC">AMC</keyword> to debit your bank account every month. 
 
Payment: The form needs to be accompanied by a cheque for the amount of investment made. The cheque is made out in the name of the mutual fund scheme. In case of a SIP, you need to provide a cheque for the first investment in addition to the ECS mandate. 
 
Accompanying documents: The form needs to be accompanied by a copy of your PAN Card and a copy of the KYC acknowledgement. 
 
Submitting the form: Your advisor will usually collect the form from you and submit it to the mutual fund company. If you invest directly, you need to submit the form to the nearest office of the mutual fund company or their RTA. 
 
Confirmation: You will receive a confirmation when your investment is accepted by the mutual fund company. This will come in the form of an SMS to your mobile number and an E-mail. If you have not provided an E-mail address, you will get a statement by post. 
 
Option 2: Online Investment Accounts 
Online investment options are much simpler because a lot of your paperwork goes away. You need to submit your documents only once and all investing and withdrawal instructions can be placed online. 
 
Registering: You will need to complete a registration form and sign an investment agreement to open an account. This process may be done by you visiting the office of your distributor, an RM visiting you or online. Typically when you sign up online, a paper form incorporaing your details will be sent to you and you need to sign and send it in. 
 
Investing: To invest, you have to go to the website of your preferred agent/fund website/trading platform and open an account. Once your account is opened, you will be emailed/couriered pre-filled application forms based on the data you provided during account creation. 
 
Payment: Payments can be made through the following means. 
· ECS debit: The distributor will send your investment instruction to the bank and money will be transferred to the mutual fund company. This usually takes 3-4 working days. 
· Payment gateway: After you specify your investment account, the online portal of your distributor will direct you to your bank’s net banking gateway and you will need to authorise the fund transfer. Payment gateway investments usually happen on the same day. You cannot use a payment gateway for SIP investments. 
· Direct Bank Account debit: If your distributor is also a bank, then whenever you invest through the online route, your bank account gets debited directly. 
 
How to choose between Online &amp; Offline investing 
While both methods have their pros and cons, it’s better to invest online due to onetime &amp; minimal documentations processes and ease of tracking your investments. Online distributors will also give you additional benefits like single view of investments across all <keyword id="6357979" type="ORGANIZATION" weightage="20" keywordseo="mutual-funds">mutual funds</keyword>, portfolio tracking, <a href="https://scripbox.com/blog/rebalancing/">portfolio rebalancing</a> and more. 
 
(About the author: This article has been contributed by <keyword id="2135489" type="UNKNOWN" weightage="20" keywordseo="Sanjiv-Singhal">Sanjiv Singhal</keyword>, CEO, <a href="http://scripbox.com/" target="_blank">scripbox.com</a>.)

Your first Mutual Fund investment, de-jargoned

If you are looking to invest in a <keyword id="6354820" type="ORGANIZATION" weightage="20" keywordseo="mutual-fund">Mutual Fund</keyword> (MF), you will find one that will match your needs but with so many companies, each with so many schemes, it will be a difficult journey to find one that fits the requirement. 
 
Here, we will focus on a few parameters that will help you in choosing the right mutual fund for investment depending on an individual’s requirements. 
 
Ø Identify the objective: Like stated before, there is a right kind of mutual fund for everyone and every need. So, the first thing one needs to do is identify their objective for <keyword id="35175" type="UNKNOWN" weightage="20" keywordseo="investing">investing</keyword> in the mutual fund. This can be based on the timeline for investment (short or long term) or the financial goal. For instance, if Asha is looking to invest in a mutual fund to save tax; an Equity Linked Savings Scheme (ELSS) will suit her requirements, while Mr. Mehta is looking for a regular flow of income so for him a Monthly Income Plan (MIP) is required. So the first step is to be sure about the reason for investing in a MF so that you can focus on that segment and choose a scheme that suits you best. You can have multiple funds to satisfy one objective or different fund to meet different kinds of goal. 
 
Ø Asses your Risk Appetite: Mutual funds are managed by professionals and generally these professionals base their decisions on extensive research. However one cannot forget the MFs are market linked products which means they are susceptible to market risk and they do not have guaranteed but have indicative returns. So before choosing a scheme it is important to understand if it matches your objectives and whether it matches your risk appetite also or not. Equity funds are high risk and high returns, while debt funds lie on the other end of the spectrum. Balanced funds as the name suggests lie somewhere in between. Generally those in advanced years do not prefer equity oriented schemes while the younger investors can afford to invest in equity funds and take some risk. 
 
Ø Focus on History: As stated earlier, MFs are market related instruments so there can be no guaranteed returns. Even for debt funds the returns are indicative; so how does an investor decide if the fund will deliver what it promises in terms of returns? This can be assessed to an extent by looking at the past performance which can be indicative of the expected future returns but again there is no surety that in the future also a similar pattern will be followed. Looking at the past returns can help in assessing a trend that a mutual fund follows in terms of returns. 
 
Ø Use Statistics: Apart from returns, certain other numbers are also important when choosing the right mutual fund. Alpha is one such indicator; it is a measure of MF’s performance on a risk adjusted basis and as compared to the benchmark. A positive alpha indicates that the fund is doing well. Beta is the measure of fund’s volatility as against the benchmark. It measures the fund’s sensitivity to changes in the market. For an investor with low risk appetite a fund which has a beta value less than one is the right choice and the opposite is true for those are willing to have a bigger risk appetite. Standard deviation in terms of a MF will indicate its volatility; how much the returns deviate from the expected returns calculated based on the past performance. An investor should also keep an eye on the various costs that he/she incurs as these costs ultimately impact the overall profitability of a mutual fund. 
 
Ø Pedigree is Important: Another factor that one should focus on while selecting a mutual fund is the fund house that is promoting it and who the fund manager is. Choosing a well known and experienced fund house will ensure that they will not indulge in unethical practices or will go bust while leaving you in the lurch. A fund manager decides which instruments or securities to invest in so an experienced and knowledgeable fund manager will ensure that you get good returns on your investments. Being preemptive and not reactive is what distinguishes a good fund manager from an average one. 
 
The above factors can hopefully help you in choosing the right mutual fund for yourself which not only helps you in meeting your financial goal but is also a safe and profitable investment. 
 
(Rajiv Raj is the Director and Co-Founder of www.creditvidya.com) 
 
(Image: ThinkStock)

Here are 5 ways that will help you zero on the right mutual fund

Proponents of passive investing will argue that just buying a Nifty 50 index fund and liquid fund is good enough. But it is good to diversify your investments across securities, asset classes, and types of stocks based on risk appetite, saving needs, and future goals. However, quite often, small investors find their money parked in one too many mutual funds. What is the optimal number of mutual funds to have in your investment portfolio? A five-fund portfolio that takes care of all your needs, according to investment advisory firm Kuvera. Over time, it will become incredibly hard to manage and rebalance your portfolio and make any changes to it. New investors should be aware of this and take proactive steps to not let their portfolios grow to too many funds. The only argument to add multiple funds is if there is minimal stock overlap – so invest in a Nifty 50 fund, a Nifty Next 50 fund, a value biased fund, an international fund and one debt fund. This is the ideal mix according to Kuvera. Just following the below rules will bring down the number of funds in your portfolio to 4-8 funds: 1. Only one scheme per Equity sub-category (e.g one large cap scheme). 2. If you are investing in market cap schemes (large, small, mid etc) then don't have a multicap scheme. 3. Avoid investing in Sector or Thematic schemes. Sector outperformance is notably hard to predict. 4. Invest in one fixed income scheme (debt or liquid). That's right, just one liquid scheme is enough. Take risk on the equity side of the portfolio. 5. If you have both equity and debt schemes then don't have balanced and hybrid schemes. Gaurav Rastogi is the CEO and co-founder of Kuvera.in, a direct <keyword id="6354820" type="DEFINITION" weightage="20" keywordseo="mutual-fund">mutual fund</keyword> investing platform

A common mistake mutual fund investors make⁠ can be fixed through five simple steps

In essence, mutual fund investing is about trusting your money to a professional <keyword id="135622" type="POSITION" weightage="80" keywordseo="investment-manager">investment manager</keyword> and letting them take investment decisions for you. You take a high-level decision to invest through <keyword id="6357979" type="ORGANIZATION" weightage="80" keywordseo="mutual-funds">mutual funds</keyword> and then let the professionals take over from there. 
 
The investment manager collects a pool of money from a large number of investors and makes the day-to-day decisions to invest it in a portfolio of securities or other assets. These could be <keyword id="6354298" type="ORGANIZATION" weightage="80" keywordseo="stocks">stocks</keyword>, bonds, gold, real estate, or some other securities. Each investor in the fund gets a share of the total assets. 
 Then you only need to monitor if the <keyword id="109711" type="POSITION" weightage="80" keywordseo="Fund-manager">fund manager</keyword> is doing a good job for you. If not, fire them by taking your money out. 
<h2>
	How it works in practice is as follows:</h2>
 
 A reputed financial service company with a track record of managing <keyword id="6362476" type="ORGANIZATION" weightage="80" keywordseo="investments">investments</keyword> sets up what is called an Asset Management Company (Also referred to as an <keyword id="6358378" type="CITY" weightage="80" keywordseo="AMC">AMC</keyword>, mutual fund company, or fund house). Not everyone can set up an AMC. They have to get a license from <keyword id="35210" type="ORGANIZATION" weightage="80" keywordseo="sebi">SEBI</keyword> (the regulator that governs mutual funds in India) by demonstrating a track record and solid financial standing. 
 
After getting a license, the AMC decides what kind of mutual fund they want to offer. They can offer just one or many options. Each is called a Mutual Fund Scheme (commonly shortened to scheme, mutual fund or just fund). They will also appoint one or more named individuals to act as the fund manager for that scheme. While offering the Scheme, the AMC clearly defines the investment objective and the mode of operation of the scheme in a set of Offer Documents the format of which has been specified by the regulator. This ensures that the public investor knows exactly how their money is going to be invested. 
 
Let’s say the fund house offers two schemes: 
 
Scheme 1: invests in stocks 
 
Scheme 2 invests in bonds. 
 
As an investor, you can choose to invest in whichever one suits your purpose. Like you, thousands of investors will ‘subscribe to’ or ‘buy’ that scheme. The money so collected is the pool of money or ‘corpus’ available for the fund manager. He or she will then take the decisions about which specific stocks to invest that money in. 
 
The total corpus of the mutual fund scheme is sub-divided into units (or shares), which the investors buy. To begin with the corpus is divided into units of Rs 10. 
 
As the value of the investments made by the mutual fund changes, the value of the units changes as well. This is called the NAV (Net Asset Value) of the unit. It’s calculated by dividing the total value of the net assets of the fund by the number of units. This is published daily so you know how your money is doing. You also get periodic statements with information about your holdings. 
 
The AMC does not do all this for free. They charge a fee for managing the money. In addition there are other costs such as brokerage fees, costs of publishing statements etc. These need to be borne by the investors and are deducted from the corpus periodically. These are called Expenses of the fund and the ratio of expenses to the total money managed by the fund is called Expense Ratio. To protect investors, the regulator SEBI has specified the maximum expense ratio that can be charged. Most fund houses manage to control costs and keep the expenses below the maximum cap. 
 
That was probably a lot of new stuff to learn in one go. But now you can hold your own when your advisor throws these terms at you: 
<ul>
	<li>
		Asset Management Company (AMC, Mutual Fund Company or Fund House)</li>
	<li>
		SEBI (Securities &amp; Exchange Board of India)</li>
	<li>
		Mutual Fund Scheme (Scheme, mutual fund or fund)</li>
	<li>
		Offer Documents</li>
	<li>
		Units or shares</li>
	<li>
		NAV (Net Asset Value)</li>
	<li>
		Expenses, Expense Ratio</li>
</ul>
The next Lesson in this series will be: Why should you consider investing in mutual funds? If you would like to learn more, stay tuned! 
 
(About the author: This article has been contributed by Sanjiv Singhal, CEO, <a href="http://scripbox.com/" target="_blank">scripbox.com</a>.)

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