I am 23 and I want to invest in a mutual fund scheme for a year so that I can learn about how we can earn money from a mutual fund scheme. What is the minimum amount one can invest in a mutual fund scheme? Can you suggest a scheme for short-term investment? Govind More, Pune.

Congratulations on your move to start investing in mutual funds at such a young age. You need to be KYC (know your customer) compliant before you can start investing in mutual funds. You will need to get your KYC done, which will require filling up a simple form, along with your bank details, PAN, photograph and identity proof. Just the way a key is crucial to open a lock, so is a KYC to start investing.

Now, as you wish to invest for less than a year, it is recommended you invest in a debt fund scheme. Consider putting your money in an ultra short-term fund which is suitable for parking money for a few months to a year. This exercise will definitely be an experience, but it will be not very different from how money stays in a bank fixed deposit.

To experience the real advantage of mutual fund, consider putting money in a fund that will create wealth. Invest in a balanced fund like Canara Robeco Balanced or HDFC Balanced to experience the advantage of mutual fund investments. You can start with a one-time Rs 1,000 investment and follow it with Rs 500 by way of SIP in the same fund for the next one year or more and see how your money fares. Ideally, investment in equity schemes should be held for 3-5 years at least, but in case of balanced funds, you could retain it for a lower time frame. These funds have an equity and debt mix that is maintained by regular rebalance, which is suitable for first-time investors.

olmdesk@outlookindia.com