Mutual Funds

What is a Mutual Fund?

Mutual fund is an investment vehicle which allows investors to pool their money with other investors to buy shares, stocks, bonds, gold, and other assets. All the profits and losses of the fund’s total holdings are equally shared among investors in the proportion of the share of the investment. They are run by expert money managers who decide which securities to buy and when to sell them in order to generate high returns. One can invest in mutual fund online as there are many trusted agencies through which you can start investing.

What are the Major Types of Mutual Funds?

If you wish to invest in mutual funds for capital appreciation and high returns, then you must know about the different types of mutual funds. Let’s know about each of them:

Equity Mutual Funds:

These funds are the schemes which invest a majority of their assets in stocks. They are considered as the great investment option as they have the potential for long-term wealth creation. Equity funds are further divided into four types:

Large-cap funds

These funds invest almost 80 percent of their assets in the top 100 companies given by market capitalization.

Mid-cap funds

These funds invest 65 percent of their assets in the companies that are ranked by market capitalization from 101 to 250th.

Small-cap funds

Such funds invest at least 65 percent of their assets in companies ranked from 251 and above.

Multi-cap Funds

These funds invest at least 25 percent of their assets in each of the above funds like large-cap, mid-cap, and small-cap stocks.

Debt Mutual Funds

These funds generate returns for their investors by lending money from corporate institutions and the government by buying debt papers. They are classified into different categories like money market funds, corporate bond funds, overnight funds, and liquid funds.

Hybrid funds

This type of fund is invested in different asset classes with a mix of equity, debt or gold. Aggressive hybrid, balanced hybrid, dynamic asset allocation funds, and arbitrage funds.

There are many online mutual fund agencies or companies that offer correct financial advice, so don’t wait anymore and begin your quest.

What are the Benefits of Mutual Funds?

Investing Support by Professionals: When you make an investment in mutual funds, your money is managed by professional money managers who hold extensive years of experience in investing.

Power of Liquidity: Mutual funds give investors the leeway to buy and sell their invested money anytime according to their needs. Therefore, as compared to the other instruments, mutual funds offer the feature of maximum liquidity.

High Returns: Unlike other traditional investment options like FD, RD, and PPF, mutual funds give high returns to an investor.

Start with small money: You can start investing in mutual funds with the minimum amount of Rs 500. To begin the investment, you need not have a large capital or a lump sum amount.

Reduced Risk: There is no denying the fact that mutual funds are subject to market risk, but as mutual funds invest in the basket of stocks, bonds, etc., your portfolio becomes diversified and hence there is less risk involved.

Protect the investor’s interests: As mutual funds are regulated by SEBI guidelines, there is no chance of frauds and bogus transactions. It makes every process transparent and secure for investors.

Tax benefits: When you invest in financial instruments like mutual funds, you can claim a tax benefit of up to Rs 1.5 lakh per year in ELSS. For tax deductions, people find buying mutual funds a smart choice to make.

What are the Ways to Invest in Mutual Funds?

There are two ways using which you can invest in mutual funds.

    1. SIP (Systematic Investment Plan)

Little drops make the mighty ocean. And, that's how SIP works too. One of the most recommended ways to invest in mutual funds, SIP allows us to invest a fixed amount of money in the selected fund every month. It helps you average out the cost at which you buy the units of the preferred funds.

    1. Lumpsum

When you have a large chunk of money to invest, then you can make a one-time investment to meet your financial goals.

How to invest in Mutual Funds in India?

You can easily invest in mutual funds online by using legit applications or companies. There are simple steps that make the investment process simple, convenient, and easy.

  1. First, you need to sign up for a mutual fund account at a company that provides excellent financial services.
  2. Complete the KYC formalities
  3. Study and identify the funds you wish to invest in based on your financial objectives.
  4. Select the fund and the amount to transfer in that selected fund.
  5. Issue a standing instruction with your back in case you invest through SIP at regular intervals.

Investing in mutual funds is truly an effortless way to grow your money fast and achieve your financial goals. From retirement plans, children’s education, child’s marriage to illness, with this investment you need not be worried about the financial hardships that never knock. Give it a slow start, and with time you will realise that your investments have grown by leaps and bounds.