A step-by-step guide to investing in mutual funds - part 1

Zerodha Educate

04-07-2020 • 55 mins

Since Feb 2020, we've seen historic and unprecedented volatility in the Indian markets. We saw the fastest fall in the markets and also one of the fastest recoveries in the history of the Indian markets. All this was within a space of a few months. Surprisingly, we are seeing a sharp uptick in the number of new investors enter the markets, but the mistakes some of them are making are the same old ones. Over the past few months, we've had conversations with some of the most experienced participants in the markets to put this insanely volatile market phase in perspective.

But we also realized that investors were lacking context on how to think about investing even before they put their first rupee to work. So we figured, there's no better time than this to do this. Given that Vidya has been interacting with investors for the better part of a decade in various capacities, we reached out to her and she graciously agreed to talk to us.

In this conversation, Vidya talks to Prateek about:

  1. How to think about risk and reward when investing
  2. How to set goals and why a goal-based investing framework helps you invest better
  3. How to have returns expectations
  4. How do you figure out your risk tolerance
  5. What the hell is asset allocation, why it matters and how to figure out the right asset allocation for you
  6. Active vs passive funds
  7. How to pick an equity fund
  8. How to sort through the various styles of funds and how to include them in your portfolio
  9. Do's and don't when picking an active funds
  10. Growth vs dividend plans

Once you have heard the conversation, you will have a framework on how to think about investing, why you need to invest, set goals and pick your first fund.

Do check out PrimeInvestor for some insightful perspectives on investing, fund selection, portfolio construction by Vidya and her colleagues.

You can also check out this LearnApp course on mutual funds.

In part 2 of the conversation, we'll talk about the right way to pick debt funds, rebalancing and portfolio maintenance.