How can a youngster start investing in mutual funds?

I am 20 years old. I want to invest in mutual funds, but I don't have any knowledge about how the market works. How shall we start investing or trading in mutual funds? What should be our financial plans to consider investing or trading in the market? What intensity of risks shall we consider? Which books should we go for and how can or from where can we acquire knowledge about investing or trading? Which is better - learning and becoming an expert and then investing or learning and Investing simultaneously?
- Pranab Padhi

First, if you do not know much about mutual funds or basics of investing, you should seek the help of a mutual fund advisor. Invest through him for a few years and learn about mutual funds and basics of investing. Once you gain enough knowledge and confidence, you may start thinking of investing directly.

You should always choose a mutual fund based on your goal, investment horizon and risk profile. As a rule, you should stick to debt mutual funds that invest in fixed income securities to take care of your short-term goals that are below five years. Always choose a debt scheme based on your horizon and risk-taking appetite. For example, you should choose a liquid scheme to park money for a few days or weeks. If you are investing for a few months, you may choose an ultra short duration scheme.

For long-term goals, you may consider investing in equity mutual funds. Always choose an equity mutual fund scheme that is in line with your risk profile. For example, if you are a conservative equity investor, you should choose a large cap mutual fund. If you are a moderate equity investor, you may choose multi cap mutual funds. You may choose mid cap or small cap schemes if you have an aggressive risk profile and a longer investment horizon.

You may visit our website (ETMutualFunds.com), and especially the fund basics section (Mutual Fund Basics) to learn about mutual funds.