What is a mutual fund? What is Mutual Funds?
Mutual fund is made up of the words Mutual and Fund.
Mutual means Hindi - mutual, mutual or mixed, and Fund means Hindi - money, and thus mutual fund means - Mutual Funds of many people gathered together .
A mutual fund is an investment in which a large fund is made by mixing together the money of a lot of people and collecting it together.
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mutual fund is a type of collective investment. In this, a lot of people together make a pool and collect money. This money is given to a fund house. Fund managers invest the money in shares of different companies. Fund managers are experts in the stock market. They invest in companies that perform well. These fund managers also charge a fee of 2-2.5% annually to manage this money.
The share price of a mutual fund is called NAV-Net asset value . To calculate this, the total value of the fund is divided by the number of total shares purchased by investors.
Why is there a need to invest in mutual funds? Should one invest in mutual funds?
1. Common investors are easy way to invest in stock market.
2. Investing through mutual funds is more secure.
3. To reduce the risk, invest money in different sectors.
4. Investment in mutual funds is necessary to beat the inflation rate.
5. Professional funds get the benefit of investing in mutual funds.
6. Very little money is required to invest in it.
7. Cashing investments in mutual funds is very easy.
What are the things to be kept in mind to invest in mutual funds?
1. You decide the amount of investment.
2. Decide the period of investment.
3. You should collect funds according to the period. Debt funds or liquid funds should be taken for short duration and equity funds for long term.
4. The purpose of investment (Aim) should be decided.
5. It is important to see the track record of the fund.
6. Choose a fund that does not have a lot of ups and downs.
How to start investing in mutual funds?
You can invest in mutual funds online / offline . Online investment is done in mutual funds through AMC (Asset management company) and offline investment is done by going to a bank, brokerage houseand applying .
In online investing, register yourself by visiting a bank or AMC's site. Fill the necessary information in it, folio number, mobile number, e-mail. After that the user ID, password is found and you can invest by logging in.
To make offline investment, you contact an agent or distributor. After that the application forms are filled. After filling the form and handing it over to the agent with the necessary documents, the mutual funds company then gives you a statement.
Investments in mutual funds can also be done through SIP (Systematic Investment Plan). Every month, some money is invested in mutual funds. You can start a SIP with at least 1000 rupees . All the new investors can start investing through SIP.
What are the types of Mutual Funds? Types of Mutual Fund?
1. Equity funds - The risk in this fund is high. It has the highest return. It invests in the stock market.
2. Debt funds - This fund has less risk than equity funds. It offers lower returns than equity funds. This fund is good for investors who want permanent income. E, the fund invests in diversion, government securities.
3. Open-ended Funds- It has no fixed maturity date. You can buy or sell units at any time. There is liquidity in this fund. Some open-ended funds have a lock in period.
4 .Closed - ended funds -One can invest only in NFO. You can neither invest it in the middle or withdraw money. You cannot withdraw money before maturity. In this, the maturity date is set in advance.
5. Balanced Funds- This fund offers both growth and funds. The fund is invested in both equity and debt schemes. It already determines how much fund to invest in.
6. Money market fund - This fund is safe. This fund offers lower returns than other mutual funds. This fund is for those who want immediate benefits.
7. Guilt fund -This fund has been considered the safest fund. In this, the government invests money from the investors in government schemes. There is a backup of the government, so there is no risk of money sinking.
8. Liquid Fund - The money under this fund is mainly invested in short term instruments. This fund is known for giving good returns on short-term investments.
What are the benefits of mutual funds? Benefits of Mutual Fund?
1. In mutual funds, you invest money in different companies, such as your money is invested in different stocks and bonds. It is beneficial that if the money invested in one company is drowned, then the gains made from the rest of the place get.
2. You get an exemption of income tax on investing in mutual funds.
3. The big banks and companies in India have mutual funds, in which you can easily invest money.
4. Mutual Funds Company collects the investment amount of all the investors and also charges some convenience fee from them. He then invests this amount in the market for them. This does not require the investor to worry about buying or selling as the fund manager is concerned about it.
5. Small investors can invest very small amount like 500 or 1000 rupees per month.
6. Mutual funds are a good way for those who wish to invest even if there is not enough knowledge of the stock market.
7. You can easily withdraw money invested in mutual funds. You may have to wait for a lock-in period of 3 years only for money deposited in the EL SS mutual funds scheme.
8. In most cases the money withdrawn from the mutual fund gets deposited in your bank account within 2 -3 days, that is, it takes very less time to withdraw the money deposited in the mutual fund.
9. You can choose mutual funds according to your money goals and needs. Today, more than 2000 mutual fund schemes are available in the market according to the needs of the people. In this way, you can invest in a good mutual fund according to your needs and financial goals in mutual funds.
What are the disadvantages of mutual funds?
1. Mutual funds do not guarantee returns, as each part of a portfolio carries a certain element and its returns are market-linked.
2. In some mutual funds, such as close-ended, ELSS lock-in period occurs. For this reason, you cannot use the funds when needed.
3. Mutual funds charge to manage your fund. The cost of managing some mutual fund schemes is quite high.
4. Investing money in mutual funds is a risk. If you have invested money in the same sector of a mutual fund, then when the company is at a loss, then you too will lose, so there is a risk of investing money in it.
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