Mutual Funds

Mutual Funds are investment vehicles which collect money from all the investors and invest in bonds, equities and/or money market instruments. These investors share a common objective, as in the kind of instruments the investment has to be made, or the combination of two or more kinds, or on the basis of risk profile. You can start your investment with just Rs. 500!!

This entire pool of money is managed by fund manager. He is the one who strategizes in order to make a particular mutual fund scheme a profitable bet.

All these mutual fund scheme charge an expense, upto 1.5% of your invested amount, in order to pay the fund manager, and for their management plus miscellaneous expenses)

The profit or the returns generated from a particular instrument (after deducting the fees), is distributed on the proportionate basis, depending upon the investment amount.

Types of Mutual Funds

There are multiple ways in which mutual funds can be categorized, for example, the way they are structured, the kind of securities they hold, their investment strategies, etc. The Securities and Exchange Board of India (SEBI) has classified mutual funds based on where they invest, some of which we have listed below.

 

Open-ended funds

Open-ended funds are mutual funds that allow you to invest and redeem investments at any time, i.e. they are perpetual in nature. They are liquid in nature and don’t come with a specific investment period.

Close-ended

This is purchased for covering medical expenses revolving around various health issues, including hospitalisation, treatments and so on. These insurance plans come in handy in case of medical emergencies; you can also avail of cashless facility across network hospitals of the insurer

How to grow money with Mutual Funds?

How a mutual fund performs depends much on the fund manager. Which stocks he chooses for investment, when to hold, when to buy and when to sell – are the important drivers for growth of any mutual fund.

Then there are a bunch of other reasons as well; how is the country’s economy is doing? And what is the general sentiment in the country?

Further, if an investment has to be done in mutual fund schemes, make sure that the investment is at least for 3 years.

Also there are short term factors like market sentiments, elections, because of which indexes are not stable. Herein lies the opportunity to gain. Because of this very ‘volatile’ nature of market, mutual funds, especially equity mutual funds’ NAV tend to fluctuate.

You can invest when the market is low and redeem when the market is high.

Why you need a Mutual Fund Advisor?

Trusting someone with your hard earned money is difficult indeed. Choosing a scheme out of 18000+ schemes is worse.

When you are investing, the kind of scheme you are putting in your money matters the most. It is extremely important to know how much risk you are ready to withstand, which again depends upon a multitude of factors.

Also, with time, portfolio rebalancing is important. How much should be allocated to debt, and how much should be put in equity and with time making sure that the ratio is maintained, is a mountainous task. Here is where the financial advisor comes in.

Your advisor will take care of your money, your taxes, and will be answer to all your questions like where and when to invest?

Not everyone can make their investments alone mainly because of the time constraint or/and the inclination in the research part.

FAQ's

Mutual funds offer investors a reliable, time-tested method of growing investments at a rate faster than traditional investment instruments. They have the potential to offer higher returns, capital growth, and income generation, provide a hedge against inflation, and enable fund generation to meet various long- and short-term needs.

 

How can I make money from a mutual fund scheme?

When it comes to mutual funds, an investor can make money in two possible ways: income earned from dividends on stocks and price increase of the stock.

Can I lose my money in a mutual fund?

Theoretically, yes. But if you stay invested long enough, that possibility goes down to almost zero.

How do investors redeem their funds?

All that an investor has to do is log in to his online mutual fund account, press the redemption button, and confirm the transaction. The redemption amount will be credited to his bank account within the turn-around time.

Are mutual funds better than stocks?

Stocks are generally riskier than mutual funds. When an investor pools in a lot of stocks in a stock fund or bonds in a bond fund, mutual funds reduce the risk of investing. This lowers the risk, thanks to diversification. For that reason, many investors feel that mutual funds provide the benefits of stock investing without the risks.