Many of you want to invest or are thinking of investing in Mutual Fund , but there is also a fear in your mind that the money will not be drowned, because there is no complete information about Mutual Fund.Therefore, to help you, we have brought an article with the help of which you will know what is Mutual Fund?How does Mutual Fund work and how will investing in Mutual Fund benefit you?
Any investment is subject to risks, but if you have the right information such as which Mutual Fund Plan is right for you, whether or not your financial needs can be fulfilled by investing in Mutual Fund, then your fear is also reduced. Will be able to do it and will also be able to invest properly.
So let’s start and know in full detail about Mutual Fund.
What is Mutual Fund?
The Mutual Fund is run by the Asset Management Company. These companies collect money from investors and then invest in the market.
Every Asset Management Company (AMC) wants investors to get maximum profit, hence professional fund manager to manage funds, who have good investment experience.
What are the Best Children’s Gift Funds?
For those who do not have any experience in investing in Share, Bond or Financial System in any way , investing in Mutual Fund is a good option.
Because you do not have to invest directly but give your money to AMC. Then the professionals sitting in AMC will decide where to invest the money so that they can get profit.
How does Mutual Fund work?
An Asset Management Company (AMC) is the first to collect funds from all types of investors, big and small. For this, AMC offers many types of plans.
Investors can invest in the plan they like. Once invested, the investor is finished. Then the real work of AMC starts from here.
Now the company invests the accumulated funds in many places like Bonds, Security, Share, Government Securities, Fixed Income Securities and Money Market Instuments.
All Assets Management Company adopt a very good Formula to reduce the risk.
She does not invest all the money in a company of one sector, but instead invests in companies of every sector so that even if there is a loss situation in one sector, then it can benefit from the other sector.
For example, if you have Rs 100 in Mutual Fund. If invested, AMC will not invest this money in one place. 25 rupees In banking, Rs 20 25 in automobile 30 more in the pharma sector. Can invest in real estate.
The combination of ‘debt funds’ and ‘equity investment fund’ is very good. Mutual funds are much less Risky than investing in the stock market. That is why it is called better.
Types of Mutual Funds.
Mutual Funds are mainly of 4 types.
1.Equity Mutual Fund
2.Debt Mutual Fund
3.Hybrid Mutual Fund
4.Solution Oriented Mutual Fund
1. Equity Mutual Fund
Equity Mutual Fund has investors directly investing in the Share Market. It is believed that Mutual Fund which invests 65% of its portfolio in Equity Shares is called Equity Mutual Fund .
In such Mutual Funds, the risk is highest but there is also the ability to give good returns. If you are planning a long term investment (around 10 years) then it is better for you.
There are also several types of Equity Mutual Funds: –
Small-Cap Funds:
Equity funds that invest in the shares of companies with small market capitalization are called Small Cap Funds.
In simple words, just understand that companies whose total value is less than 500 crores , Comapny comes under it.
How tax is deducted on the income of mutual funds, know all about the rules
Here the risk is highest but the return is also the highest because such a company is developing.
Mid-Cap Funds:
Such funds are invested in the shares of companies whose market capitalization is small. The total value of shares of such companies is between 500 crores and 1000 crores .
Such companies have developed and are on the way to becoming a big market company. Therefore, the investment made here can give good returns.
Large Cap Funds:
These funds are invested in the shares of companies having large market capitalization. Companies whose total value of shares is more than 1000 crores are considered as large cap companies.
Such companies are big companies in their field. Investing in them is considered a bit less risky. It is considered good to invest in them.
Multi-Cap Funds:
The Fund Manager works smartly. He does not invest your money in a company with the same market capitalization, but invests in a company with all market capitalization .
If there is a situation of loss from some place, then withdraw money from there and invest in another place.
Sector or Thematic Funds:
In such funds all your money is put into the company of a single sector. Be it Small Cap, Mid Cap or Large Cap. Just care is taken to invest in the same sector .
Index Funds:
First the Fund Manager tracks the best performing shares in BSE Sensex and NSE Nifty , only then does he plan which stocks to invest in. Those Shares that perform well are invested in similar Shares.
ELSS:
If you want to save tax by investing in Mutual Fund, then you should invest in Equity Linked Saving Scheme (ELSS). The investment made in this comes under section 80C of the Income Tax Act 1961 , in which the investor gets Rs. 1,50,000. There is a provision to get tax exemption in excess of Rs.
2. Debt Mutual Fund | Debt Mutual Fund
Mutual funds that invest more than 65% in debt securities are called Debt Mutual Funds.
Such funds have a lower risk than Equity Funds. Although the return is also less, but more returns than the bank.
Lakhpati can make you only 1000 rupees every month! Know how?
If your goal is for a short duration then you should invest in it, like making a target of 5 years and investing in it is a good option.
Such funds mainly invest in Government Bonds, Semi Government Organization, where there is little chance of money sinking, as well as fluctuations in the market are not much affected.
There are several types of Debt Mutual Funds: –
Dynamic Bond Funds:
In such funds, the portfolio of the Fund Manager investment varies by observing the interest rate.
Income Funds:
Under Income Funds, investments are made in a place where the maturity period is long, but stable returns are definitely available. The maturity period in such funds is at least 5 years.
Short-Term Debt Funds:
Such funds are invested in a place where Maturity comes quickly. The Maturity Period of such Debt Funds is usually 1-3 years old.
Liquid Funds:
Liquid Funds are also a type of Debt Funds that invest on Assets where the Maturity Volume of the investment comes within 91 days. Its return is more than that of saving account.
GIlt Funds:
This is also a type of Debt Fund where investments are made on Government Securities which are quite high. While investing in a governing body is less risky, the risk in high-quality government securities decreases further.
Credit Opportunities Funds:
Investing in this Debt Funds is considered to be the most risky as it involves investing in institutions where the risk is high but the chances of getting more returns are equally increased.
Fixed Maturity Plans:
This is a type of Fixed Deposite in which you have to lock investment for a certain time. But its most important thing is that the fluctuations in the returns are almost absent. Investments are made in Government Bonds etc.
3. Hybrid Mutual Funds | Balanced or Hybrid Mutual Funds
As the name suggests, there will be something mixed in this fund, because this is what Hybrid means. Now you read above that Equity Mutual Fund has some advantages and some disadvantages.
The same is with the Debt Mutual Fund . It also has its advantages and disadvantages. So the people managing the fund thought that why not create a system where Profit can be found like Equity Fund but less like Risk Debt Fund.
This is what started the Hybrid Mutual Fund. Its fund is very simple to invest some money in Equity, and some in Debt. If there is a good return from the Equity Fund, then there is no problem, but if it is not received, there will be something from Debt Funds. Which will not cause overall loss.
There are also several types of Hybrid Fund: –
Equity-Oriented Hybrid Funds:
Such Hybrid Funds are more inclined towards Equity. That is, they invest about 65% of their total investment in Equity Shares.
Debt-Oriented Hybrid Funds:
Such funds are more inclined towards Debt Security. They mostly invest in Government or Semi Government institutions.
Monthly Income Plans:
These hybrid funds mostly invest in Debt Share, Bond or Securities. The effort of this fund is that a certain return will always be given, even if it is a little less, but will always be available.
Arbitrage Funds:
They buy Financial Security at a lower price from one market and sell it at a higher price in other markets and you will get the profit that happens. In addition, Debt also invests in securities.
Solution Oriented Mutual Fund:
Some Mutual Funds are created with a specific objective in mind. Such mutual funds fall into this category. Like some funds are made keeping in mind the expenses of retirement, marriage, children’s education.
It is also considered better to invest in such Mutual Funds, especially when you are in need of money after a certain time.
While investing in such Mutual Fund, keep in mind that there is a plan to invest at least 5 years.
Benefits of Mutual Funds
It is very easy to manage.
Its biggest feature is that it can be easily managed. One can buy and sell Mutual Funds on any day, while doing so in Bank FD etc. is difficult.
Diversity is strength
In this, your invested money is put in many different places. This is done so that you do not incur losses.
You must have heard about the Share Market that all the money is put in one share. Now if Share has done well then silver is silver, otherwise money has sunk. But this is not the case in Mutual Funds.
Expert do Fund Manage.
The special thing about Mutual Fund is that in this your investment is supervised by Expert, who are very experienced and this is their job.
Whereas in the Share Market you have to see everything. Nobody will give you tips. Along with this, you also have to see your job, family etc. That is, you will not be able to do this work by being completely dedicated .
You can start with less investment.
There is no need that you have lakhs of rupees. Only then you will be able to invest here. 500 only You can start investing in Mutual Funds. You can invest together or every month.
Losses of Mutual Funds
Mutual Funds have certain limitations which are as follows: –
Return is not fixed.
How much return will be received on your investment in Mutual Fund is not decided. Some investments in Mutual Funds are risky while some involve low risk. But the return is completely subject to the market, so it is not fixed.
If you invest continuously in Equity Fund for 5-6 years then your investment gives a good return.
Expect to spend more.
Spending in some funds is too much. So check before investing in any fund. If you become part of a Mutual Fund whose charges are very high, then you will lose less.
How to choose a good Mutual Fund?
You should choose Mutual Fund based on your need and ability to take risk. You should invest in Equity Fund only when you are ready to take more risk.
If you want to get moderately low risk, then you can invest in Hybrid Fund. If you want very little risk, then it is best for you to invest in Debt Fund.
Keep these things in mind while investing in Mutual Fund .
Keep in mind the expense ratio. Do check the expense ratio of the company. Always invest in a company with low expense ratio, so that the company will have to pay less of its profit.
Do check out the fund manager experience.
Must see the company’s portfolio. Find all the information about where the company is investing, whether it invests in the same type of company or is investing in a company of different sectors.
Essential qualifications for mutual funds
NRI, any Indian can invest. There is no need for much money, only 500 rupees. Can start investing from. There is no age limit either. Mutual Fund of people below 18 years of age will be seen by their parents, after that the person can manage himself.
