Mutual fund in simple language is an investment option where your money is pooled with the money of other investors and then invested in stocks, bonds, short-term money market instruments, and/or other securities under the direction of a professional fund manager.
Let’s understand the concept of Mutual funds:-
Mutual funds are among the most popular methods of investment today. Mutual funds also provide the facility to invest with very small amounts. Due to this ability, new investors can also invest in mutual funds to make larger funds in the long term. Has proven reliability.
Mutual funds are often named prominently in the popular mediums of investment. In such a situation, it is very important to know what a mutual fund is. Simply put, mutual funds mean collective investment. In the literal sense, it can be called mutual fund. Funds that make a profit by investing in shares and securities from funds collected from various investors are called mutual funds. In order to make the maximum profit from investing, the fund manager will use the funds. Management. Every profit and loss earned in the above manner is distributed equally among all investors. All companies of mutual funds in India are registered under SEBI (Securities and Exchange Board of India). SEBI ensures that It says that every company registered in India should not play any kind with the interests of its investors.
Benefits of investing in mutual funds:
Investments in mutual funds are managed by fund managers in a professional manner. They, by their experience, invest in the right places to ensure maximum returns. Pointwise knows the benefits of investing in mutual funds.
1. It is not necessary to invest a large amount in a mutual fund. You can start investing in mutual funds with only 500 rupees and later this investment can be increased.
2. Your investment amount is managed efficiently by the fund manager. After collecting all this information, they invest in profit-making shares and other securities. Therefore, a new investor can also invest easily.
3. Through mutual funds, we can invest in diversified mediums. For example, if you invest in equity stocks directly, you can invest in only a few companies. On the other hand, money invested in mutual funds is invested in hundreds of stocks. So it is not wrong to say that mutual funds provide us with a variety of investments.
4. Investing in mutual fund funds is very easy. Investors can invest both online or offline.
5. In mutual funds, a balance is created between equity and debt, thereby reducing the risk arising from fluctuations in the stock market.
6. Mutual funds can be invested through lump sum and SIP investment. A large amount can be invested in a mutual fund at one time from a lump sum, while a fixed amount can be invested in a mutual fund of your choice every month for a long time through the sip.
7. Tax rebates are also available for investments up to Rs 1.5 lakh in a year through equity-linked savings ELSS such as equity mutual funds.
8. The biggest reason for the popularity of mutual funds is the ease of investing and withdrawing in it. You can invest in it anytime and withdraw your money at any time. But if you deposit your money in fixed deposits, ahead of time You have to pay extra charge when withdrawing money.
Types of Mutual Funds:
Mutual funds are one of the most elaborate means of investment. All possible ways of investment from equity, debt to government securities are covered under mutual funds. The following are the 5 major types of mutual funds.
Equity Fund: Equity fund is a scheme of mutual fund that invests in shares. They are also called growth funds (growth funds). Investing in the short term can be risky but investing in this scheme for the long term gives better returns. Investments made in this scheme for a period of 10 years are considered more correct. According to the market, it is divided into 10 types such as large-cap, mid-cap, small and micro.
Debt Mutual Fund: Debt fund invests mainly in a mix of debt or fixed income securities such as government securities, treasury bills, corporate. Its goal is to invest in fixed income instruments. Those people prefer it. Those looking for a stable income with relatively low risk. They are comparatively less volatile than equity funds.
Hybrid Mutual Funds: Schemes that invest in both equity and debt asset classes are called hybrid mutual funds. Apart from investing in more than one asset class, many times these schemes also invest in gold. In this way, their investment is quite diversified. The market regulator SEBI has clearly defined them by creating seven hybrid schemes. These include Aggressive Hybrids, Conservative Hybrids, Balanced Hybrids, Dynamic Asset Allocation or Balanced Advantage, Multi Asset Allocation, Arbitrage, and Equity Saving Schemes. These schemes increase capital through equity as well as create a regular income path from the debted portion of the portfolio Keeps it. In this way, these funds do double the work of increasing capital and securing.
Solution-Oriented Mutual Fund: This scheme is made according to a specific goal or solution. These may include goals such as retirement schemes or child education. In this scheme, you need to invest for at least five years. This is a great option to make money for the long term. Earlier this scheme used to have a lock-in of three years but now it has been extended to 5 years and as per the directive of SEBI, the classification of equity and debt mutual funds were classified under separate schemes.
Gilt Mutual Fund: A gilt fund is a cyclical product – which changes with economic conditions. Gilt mutual funds are considered the safest fund due to investment in government schemes. Due to the government’s backup, there is no fear of sinking money in it. Gilt Fund is an investment opportunity that you can achieve both your long and short goals.
On the basis of the above, if you collate, a mutual fund is an entity that collects a large amount of investors’ money to invest in various securities. This money is then managed by a professional fund manager on behalf of the unit holders to invest in various financial instruments. The benefits of which investors surely get. However, the need to choose the mutual fund carefully It happens. In this, from the possibility of getting returns, how long the investment needs to be taken care of, as well as questions such as the utility of the scheme in terms of tax savings.
Disclaimer: All efforts have been made to ensure that the information given here is accurate. Verify the plan/funds information before making any investment.