A Guide To Investing In Paytm Mutual Funds

Investing in mutual funds can be a great way to create wealth and achieve financial goals. Paytm Money offers an easy and seamless way to invest in mutual funds right from the Paytm app. With no hidden charges or investment fees, it provides access to various direct mutual fund schemes by different fund houses. In this article, we will discuss the benefits of investing in mutual funds through Paytm, the step-by-step process to get started, and some important considerations for making informed investment decisions. Whether you are a beginner or an experienced investor, Paytm Money offers a simple, transparent, and accessible platform for all your mutual fund investments.

How to open a Paytm Money account

Opening a Paytm Money account is the first step to investing in mutual funds through the app. Here is a step-by-step guide on how to open a Paytm Money account:

Step 1: Download the App

Download the 'Paytm Money' app from the App Store or Google Play. This app is dedicated to investments and is different from the regular Paytm app.

Step 2: Log in to the App

Log in to the Paytm Money app using your existing Paytm account credentials. If you don't have a Paytm account, you can create a new account by providing the required details, such as your mobile number and creating a password.

Step 3: Verify your Mobile Number

After logging in, enter the One-Time Password (OTP) that you will receive on your registered mobile number. This step is to verify your mobile number and link it to your Paytm Money account.

Step 4: Complete the KYC Process

To complete the account opening process, you will need to undergo a Know-Your-Customer (KYC) process. This is a mandatory step to comply with regulatory requirements. Provide the necessary details and documents, including identity and address proofs, for KYC verification.

Step 5: Explore Investment Options

Once your Paytm Money account is set up, you can explore the various investment options available on the app. The app offers a range of investment products, including mutual funds, stocks, National Pension System (NPS), and more.

Step 6: Understand Your Investment Goals

Before investing in mutual funds, it is essential to evaluate your investment goals, time horizon, and risk tolerance. This will help you decide on the category and type of mutual funds that align with your financial objectives.

Step 7: Research Mutual Fund Schemes

Paytm Money offers a range of mutual fund schemes rated by reputed agencies. Compare fund performances, check portfolio insights, and review detailed information about each fund, such as Net Asset Value (NAV), fund managers, returns, and associated risks.

Step 8: Start Investing

After finalising your investment choice, you can proceed with investing in the selected mutual fund scheme. You can choose to invest a lump sum amount or opt for monthly investments through Systematic Investment Plans (SIPs).

Remember to review the terms and conditions, as well as the associated risks, before making any investment decisions. Additionally, consider seeking independent financial advice if needed to ensure that your investment choices align with your financial goals and risk appetite.

How to compare different mutual funds

When comparing different mutual funds, it is important to look beyond absolute returns and consider other aspects such as consistency, resilience, risk, and expense ratio. Here are some detailed guidelines on how to compare different mutual funds:

Benchmarks

According to SEBI's mandate, each fund declares its benchmark and considers it a target for performance analysis. If the index rises by 12% but the NAV of the fund rises by 14%, the fund has outperformed the index. Conversely, if the index falls by 10% but the fund loses by 12%, it has underperformed. The goal is to find a fund that gains more in a market rally and loses less in a slump.

Investment Horizon

Your investment horizon is the period for which you stay invested in a given fund. This becomes a driving factor for fund selection and comparison. Equity funds are suitable for long-term horizons of at least seven years, while liquid funds are better for short-term investments, providing moderate returns with capital safety. Compare fund returns over similar periods and select the fund with superior performance across different intervals.

Risk-Adjusted Returns

When investing in mutual funds, you undertake some risk related to the variability of fund NAV according to market movements. To compare funds on the grounds of risk-adjusted returns, you can use financial ratios such as alpha and beta. Beta indicates the amount of risk involved in investing in a fund, while alpha shows the extra return generated over the underlying benchmark. A higher alpha is preferable, as it indicates higher risk-adjusted returns.

Expense Ratio

The expense ratio is an annual fee charged by the fund house for managing the portfolio on behalf of the investors. A higher expense ratio can dent profits, so look for funds with the lowest expense ratio in their category. When comparing, ensure you are comparing like with like: do not compare index funds with actively managed funds, active funds with passive funds, or equity funds with debt funds.

Sector Allocation

Two funds in the same category may have different sector allocations, impacting their risk profiles. For example, Fund A may invest more in financial services, while Fund B may focus on FMCG companies. Compare the sector allocations and match the fund's risk profile with your risk appetite.

Quick Pointers

• Compare three-year returns of one fund with the three-year returns of another fund.
• Compare large-cap fund returns with broad-based indices like the BSE Large-cap index.
• Compare the growth plan of one fund with the growth plan of another; do not compare it with a dividend plan.
• Choose funds with a considerable history of at least five years to ensure resilience.

How to choose a mutual fund category

When choosing a mutual fund category, it is important to first establish your investment goals, time horizon, and risk tolerance. This will help you decide on the category and sub-category of mutual funds that align with your financial objectives. Here are some key considerations to keep in mind:

• Investment Goals: Determine whether your goal is capital generation with higher risks or guaranteed returns with lower interest rates. This will help you choose between different types of funds, such as equity funds or debt funds, each with its own risk-return profile.
• Time Horizon: Consider whether you are investing for the short term or long term. Mutual funds are typically recommended for long-term investments, allowing your money to grow over time. If you are investing for a specific short-term goal, you may need to consider other investment options or choose a mutual fund category that aligns with your time frame.
• Risk Tolerance: Assess your comfort with risk. Mutual funds can vary in their risk levels, with some being more aggressive and others offering more conservative approaches. Equity funds, for example, tend to carry more risk than debt funds. Choose a category that matches your risk appetite.
• Diversification: Diversification is a key advantage of mutual funds. Look for funds that invest in a variety of asset classes, sectors, and industries. This helps spread risk and potentially enhance returns. Avoid putting all your eggs in one basket by investing in multiple types of securities.
• Fund Performance and Ratings: Research the performance of different mutual fund schemes. Compare funds with similar investment objectives and evaluate their historical returns. Reputable agencies rate mutual funds, and these ratings can provide insights into the quality and potential of the fund.
• Fund Manager and Fund House: The fund manager plays a crucial role in the success of a mutual fund. Look into the track record and expertise of the fund manager responsible for the schemes you're considering. Additionally, consider the reputation and experience of the fund house or Asset Management Company (AMC) offering the fund.
• Fees and Charges: Mutual funds may come with various fees and charges, such as managerial and operational fees. While Paytm Money offers no hidden charges or investment fees for its direct plans, it's important to understand the cost structure of the fund to make an informed decision.
• Tax Implications: Consider the tax benefits and implications of different mutual fund categories. For example, Equity Linked Saving Schemes (ELSS) offer tax exemptions under certain sections of the Income Tax Act. Understanding the tax treatment of your investments can impact your overall returns.
• Investment Amount: Evaluate the minimum investment amounts required for different fund categories. Some funds may have higher entry points than others. Additionally, decide whether you want to invest a lump sum amount or through Systematic Investment Plans (SIPs), which allow you to invest smaller amounts at regular intervals.

Remember, it's important to do your research and understand your own financial situation before choosing a mutual fund category. Diversification and long-term investment horizons are generally recommended to smooth out market volatility and increase the potential for higher returns.

How to invest in Paytm Money

Investing in mutual funds through Paytm Money is a simple, transparent, and accessible process. Here is a step-by-step guide on how to get started:

Step 1: Download the Paytm Money App

Download the 'Paytm Money' app, which is available on iOS and Android devices. This app is specifically designed for payments, recharges, and investments.

Step 2: Log in and Verify

Log in to the app using your Paytm account credentials. You will then need to verify your account by entering the One-Time Password (OTP) sent to your registered mobile number.

Step 3: Explore Investment Options

Once logged in, you can explore various investment options. Click on the ''Mutual Funds' section to discover direct mutual funds for investments. You can filter funds by best returns, top ratings, fund categories, Asset Management Companies (AMCs), fund managers, and more.

Step 4: Research and Compare Funds

Paytm Money provides detailed information on each fund scheme, including Net Asset Value (NAV), fund managers, returns, and comparisons with other funds in the same category. It is important to evaluate your investment goals, time horizon, and risk tolerance before deciding on a fund.

Step 5: Understand the Risks and Costs

Before investing, be sure to check the riskometer and the minimum Systematic Investment Plan (SIP) amount. Mutual funds are subject to market risks, and the risk-return ratio varies depending on the type of fund.

Step 6: Start Investing

You can choose to invest a lump sum amount or opt for monthly investments through SIPs. Paytm Money offers a seamless process for investing, and there are no hidden charges or investment fees.

Step 7: Track and Manage Your Investments

Paytm Money allows you to track the performance of your investments and provides portfolio insights. You can also explore 'Future Options' and download advisories to build a diversified investment portfolio.

Remember, investing in mutual funds involves risks, and you should carefully consider your investment goals and risk tolerance before committing your money.

How to invest without a Demat account

You do not need a Demat account to invest in mutual funds. You can invest online or offline through Asset Management Companies (AMCs) or brokers, or online via investment apps such as Paytm Money.

To invest in mutual funds through Paytm, download the 'Paytm Money' app and log in with your Paytm account. Enter the one-time password (OTP) sent to your registered mobile number. Then, click on the 'Mutual Funds' section to discover direct mutual funds for investment. You can explore funds grouped by best returns, top ratings, fund categories, AMCs, and fund managers.

All fund schemes contain detailed information like Net Asset Value (NAV), fund managers, returns, and other funds in the same category for investors to compare. You have access to both the fund information and the AMC information, along with the scheme documents, which provide details of asset allocation and a summary of the fund. It is also advised that you check the riskometer and the minimum Systematic Investment Plan (SIP) amount before investing.

You can invest in mutual funds directly through AMCs via an online or offline process. Brokers and third-party mutual fund investment apps are also available. Brokers might charge a fee, while fund houses/AMCs will only inform investors about the schemes that they have launched. On the other hand, third-party apps contain funds from various AMCs.

Mutual fund investments can be made in two ways: lumpsum investment and monthly investment through SIPs. You can invest via SIPs in small amounts on a monthly basis. You can also invest in ELSS (Equity Linked Savings Scheme) mutual funds, which are also known as tax-saving funds. These are equity funds that offer a monthly mode of investment (SIP). Note that the provisions of Section 80C of the Income Tax Act, 1961, allow you to claim tax deductions of up to Rs 1,50,000.

Frequently asked questions