What is a Mutual Fund and how to buy?
Do you know “what is a mutual fund?” Apart from this, you may not know what types of mutual funds are and how to invest in mutual funds.
However, I am working for a well-known ‘investment advisory and advisory’ firm in India and I will try to explain to you what a mutual fund is from my experience.
Almost without hearing the name of a mutual fund, without knowing anything, many people bring up many kinds of misconceptions or misconceptions in their minds. However, 80% of people are completely unaware of it and freak out when they hear the name of a mutual fund.
So today I thought about what a mutual fund is and I’m going to explain to you all kinds of misconceptions or issues about it. Thus, it has been proven that making money by investing in mutual funds is the most profitable.
And of course, mutual funds have been found to offer higher returns on real money than any other investment broker on the market.
What is a Mutual Fund
In many cases, income more than doubles the principal amount resulting from several mutual fund plans. I myself witnessed that. Remember, to make a lot of money with this profitable investment, you have to spend a lot of time.
Looking at least 5 years, you will definitely see a good return on your investment. Hey, everyone can invest money in mutual funds.
You can start investing by keeping just Rs 500 or once a month. However, the longer you invest in mutual funds and the longer you keep the money, the more you can benefit from “compound interest.”
Many people consider mutual funds and the “stock market” to be one. But this was never true. The market includes both mutual funds and the stock market, but there is a significant difference between the two.
So let’s know below what is a mutual fund and how to invest in mutual funds.
What is a mutual fund?
A mutual fund is a fund or scheme in which several investors, like you and me, mutually reinvest in other market assets such as stocks and bonds.
There are many types of mutual fund companies or AMCs to take money from you and invest in other assets in the market. And every AMC or mutual fund company has a professional fund manager or portfolio manager to manage each individual fund scheme or fund.
a professional fund manager or portfolio manager consists of a lot of educated people who have a great knowledge of stocks or the stock market. And the money you invest or invest in a market asset or stock/equity will be the safest and most profitable for the investor(s), as they determine.
This is what a professional portfolio manager or fund manager does.
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A mutual fund is a fund or scheme consisting of several investors. The funds held here are used by the fund manager of the Mutual Fund Company or AMC to invest in other assets in the market.
And fund managers try to invest in some of the most profitable assets in the market so that investors can earn more profit or income from what they give.
Fund Manager/Portfolio Manager:
As I said earlier, every mutual fund scheme has a “fund manager” whose job is to direct the money investors invest in the right and profitable assets of the market to achieve higher returns.
Simply put, the fund manager’s job is to direct the money you invest towards profits. So now I understand, “What are mutual funds?”
Why is a mutual fund safer than the stock market? Mutual funds are definitely safer than the stock market or the stock market.
When you buy shares or shares of a company, your money will be fully invested in that company. Therefore, if the company’s stock price falls below the price you bought it, you will incur a loss.
In such a case, you must have complete knowledge of the stock market or the stock market. Otherwise, the money you invested can be completely lost in a very short period of time.
However, in the case of mutual funds, the money you invest in, the scheme or fund you invest in, the professional fund manager of the scheme or fund invests on your behalf in various stocks, bonds or assets in the market.
Professional fund managers are very knowledgeable about the issues involved in the market and are well versed in where to invest your money. Therefore, in this case, mutual funds are much safer than the stock market.
Also, in mutual fund schemes or mutual fund schemes, fund managers invest in more than one different stock, bond, or asset. As a result, your fund will not be negatively affected if the shares of one or two companies in your scheme or fund perform poorly.
This is because your fund contains shares in many other companies, which, if they perform well, will reduce risk and balance the returns of the fund as a whole. Thus, as a result of this diversification of mutual funds, the risks here are significantly reduced.
However, mutual funds are concerned with the market and therefore, schemes or funds involved in the stock market also carry a certain degree of risk.
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Types of investment funds
Well, there are many types of mutual funds. This means that we have many types of schemes for investing in mutual funds.
The types of mutual funds can be divided into three special categories.
- divided into structures.
- Types of mutual funds on assets.
- period fund.
1. Type as Structure
As a structure, there are two types of mutual fund plans. Open mutual funds In open mutual fund programs, investors can buy or sell funds or units at any time.
When you are happy you can buy the units and invest or withdraw the invested money. There is no set time to invest or withdraw funds in this type of open-ended mutual fund program. Hence, many prefer this type of open scheme.
closed investment funds
You will never be able to invest in any of these closed-end mutual fund programs. You can only invest in these closed-end funds during NFO.
Also, in these types of mutual fund schemes, you have to invest the money for a specific period.
For example, 3 years, 5 years or 6 years.
Earlier it was not possible to raise funds by selling units.
This type of mutual fund plan is a mixture of closed and open-ended funds.
Here, we present two types of funds.
It is possible to invest in Interval Fund schemes and collect the money invested here or sell units at specified intervals. This will be determined by your mutual fund or mutual fund company.
Therefore, these types of interval funds are very similar to closed-end funds, where investors cannot “invest” and “redeem” as they see fit. So, structurally, we learned the types of mutual funds above.
Now let’s get acquainted with the assets and find out how many types of mutual funds there are.
2. How many types of mutual funds are in the dark about wealth
Investors are less afraid of such schemes.
These types of schemes invest in bonds, government bonds, and other secured sources of income.
Thus, with a little risk, you can invest in debt mutual funds and get approximately 6% interest income at 6% above the principal.
It is best to invest in these debt mutual fund schemes within 1 to 5 years.
liquid mutual fund
One of the safest mutual fund schemes and without any fear you can invest in liquid fund schemes. Because
These schemes invest only in debt and money market instruments such as commercial paper, government securities, treasury bills, and other fixed-income instruments.
As such, liquid funds schemes are used for short-term investments. These liquid mutual fund schemes are best for investing money from one day to one year.
You can withdraw funds by selling saved units here at any time. Since there is no correlation with the stock market, the returns on liquid funds are not negative. This means that your money will be completely safe.
However, investing in these secured liquid funds will give you returns ranging from 8% to 8.5% per annum.
If you want to earn high returns by investing money over the long term, equity mutual funds are for you. These types of schemes or funds invest exclusively in the stock market.
As a result, these stock charts involve a lot of fear or risk. However, the more benefits or returns you can derive from these stock schemes, the more you will never be able to make more debt or liquid mutual funds.
In such a situation, the higher your risk, the higher your chances of winning. To earn a good amount of stock fund, you have to pay at least 5 years.
However, due to the market turmoil 5 years ago, you have a chance of seeing negative returns.
Money market mutual funds are more suitable for getting risk-free returns by investing for a short period of time. So, if you want to invest money without any fear, just for a few days or months, you can invest in money market funds.
This money market scheme only invests in some safe places. Therefore, the money of investors who invest here is also completely safe, however, the income from this program will be less compared to stock plans.
Balanced mutual fund schemes are special types of schemes that contain a mixture of some bond components, debt components, and sometimes money market components.
This means that the money invested in this type of balanced fund is invested in both equity and debt.
By investing in these types of funds or schemes, investors can earn a good amount of money, as well as risk and balance.
Friends, you must have lost your knowledge of what types of mutual funds are and what they are. Let us know below what are the rules for investing in mutual funds.
How to invest in mutual funds
Investing in mutual funds has become very easy these days.
You can easily start investing in any asset management company or mutual fund company.
Apart from AMCs, you can invest in mutual funds from various online mutual fund investment platforms, brokerage firms, agents, and banks. There are many trusted apps and websites for investing in online mutual funds in India.
For example, there are mobile apps like My Cam, Karvy, Paytm, and many more that people in India can use to invest in homes.
Additionally, every mutual fund company has an online investing website and app.
Therefore, it is possible to invest more easily.
Here you can invest in two ways.
SIP (Systematic Investment Plan).
SIP (Systematic Investment Plan):
SIP is a mutual fund investment tool or process, in which investors regularly invest a fixed amount every month, month, week or day. Hey, this SIP process is almost like a recurring bank investment.
Imagine that you have started a SIP in a scheme or fund for Rs 1,000.
This means that Rs 1,000 invested in your SIP will continue to be regularly invested from your registered bank every month, week or day (whatever you have saved) on the date you mentioned earlier.
This way, you will be able to start investing in the future, allocating a fixed amount each month regularly.
In this type of investment, investors invest a fixed amount in mutual fund schemes only once. I mean, suppose I invest Rs 50,000 in a scheme or fund at a time.
Therefore, this type of investment is called lump sum investment.
Mutual Fund Benefits
Of course, mutual funds have many advantages and disadvantages. Hence, people today are more interested in this new investment as compared to the old means of investing.
So let’s know below what are the benefits of mutual funds.
Liquidity to enter and exit at any time: It is possible to invest at any time as well as recover funds by selling the invested units at any time.
Diversification to spread risks:
As I said earlier, mutual fund schemes diversify fund managers to invest in the market in such a way that the money you invest is safe and at the same time increases the potential for profit.
Professional fund management:
I have said above in this regard as well. The schemes or funds you invest in are run by a “professional fund manager”. So, you don’t have to worry about market issues.
Fund managers, always keep an eye on the scheme or fund you have invested in.
Invest small amounts:
You can start investing in mutual funds with just Rs 500. Therefore, JK can invest here very little money.
Best Choice for Tax Saving:
You can benefit from tax savings by investing in the ELSS schemes of mutual funds. Also, other mutual fund schemes have a very short lock-in period compared to other tax-saving investments.
Returns and Income:
I have invested myself in mutual funds and from my experience, the stock chart here will give you the maximum chance of profit.
Mutual funds undoubtedly give us much better returns compared to banks and other avenues of investment.
Ease of investment:
One can easily invest in mutual funds. You don’t need anything special to invest here.
With just proof of identity, proof of address, and a few basic details, you can invest in mutual funds.
In addition, you can take advantage of online processes to facilitate investment.
What did we learn today?
What is a mutual fund “what are the rules for investing in mutual funds”, “what are the different types of mutual funds” and many more things that we have learned and learned today?
I hope you have understood everything said in this article. However, if you have any problems or suggestions regarding this, be sure to comment below.