Mutual Fund Tips, How to invest in Mutual Funds: You must also hear from experts that Mutual Fund is a good option for investment, where returns are also good. At the same time, the risk is less compared to the stock market. But it is not necessary that everyone should understand the mutual fund market. Therefore, it is very important to know mutual funds before investing. This will help you in taking investment decisions. Let us know what is mutual fund, how much is its category, how much return can be got. Also know how to invest in mutual funds.
What is Mutual Fund?
Mutual fund companies raise money from investors. They invest this money in assets like stock market, bonds and government securities. In return, mutual funds also charge fees from investors. There are many different mutual fund houses in the country that appoint fund managers to make investments. The fund manager has a good knowledge of the market, who, with his understanding, invests in such funds which have maximum returns. These companies earn commission from investors for investing in mutual funds. For those who do not know much about investing in the stock market, mutual funds are a good investment option. Investors can choose the scheme according to their financial goals.
How to invest in mutual funds
- You can invest directly from the website of any mutual fund. If you want, you can also take the services of a mutual fund advisor.
- If you invest directly then you can invest in direct plans of mutual fund schemes. If you are investing with the help of an advisor, then you invest in a regular plan.
- If you want to invest directly then you have to visit the website of that mutual fund. You can also go to his office with your documents.
- The advantage of investing in a direct plan is that you do not have to pay commission. Hence your returns in long term investments increase a lot.
Lump sum and SIP facility
Just like the person who invests in the stock market is called the share holder, similarly the person who invests in the mutual fund is called the unit holder. Mutual fund companies issue ‘New Fund Offers’ to deposit funds. Units are given to those investing in mutual funds. Here some amount is fixed per unit, not on discount or premium. You can invest all the money in one go or you can also invest through SIP. SIP means that you invest a fixed amount in mutual funds every month or at a fixed time.
The advantage of mutual funds is that your investments here are managed by the fund manager, who has a good understanding of the market. In such a situation, he invests your money wisely, where the returns are expected to be better. Whereas, your portfolio gets diversified through mutual funds. Because instead of just one share, money is invested in different shares or asset classes. With this, if there is a risk in one, then it gets covered in the other. Your money is also invested in debt funds, so that even if there is volatility in the market, the money remains safe. You can also save tax by investing in ELSS category.
Types of Mutual Funds
Growth/Equity Mutual Funds: In equity mutual funds, the bulk of the money is invested in equities. Because of this, the risk is also high in it. In this scheme, investors are given two options, either they choose the dividend scheme or the capital growth. They can also change this option later. This is a good option for long term investment. These funds can have an average return of 12 to 15 per cent over 10 years.
Category: Largecap Fund, Multicap Fund, Large & Midcap Fund, Midcap Fund, Smallcap Fund, ELSS, Sectoral Fund
Debt/Income Schemes: Debt funds are a good option for those who do not want to take a lot of risk and want a regular and stable income. Most of the money in this scheme is invested in bonds, debentures of companies and government securities. Since all these are like debt, hence market volatility has no effect on it. All these options provide a regular income to the investors. In this, the income is less as compared to equity but the risk is also less. The 10-year average return in these funds can be 8 to 10 per cent.
Category: Ultra Short Duration Fund, Short Duration Fund, Medium Duration Fund, Long Duration Fund, Liquid Fund
Balanced Fund/Hybrid Scheme: As the name suggests, these funds are balanced. These funds invest in both equity and debt. So that along with increasing the income of the investors, they also get regular income. It is already told in this document, how much of your money will be invested in which scheme. This is usually a ratio of 40:60. Talking about this segment, the average return in the last 10 years can be in double digits.
Solution Oriented Scheme: These schemes are made according to a specific goal or solution. These can be goals like retirement scheme or child’s education. You need to invest in these schemes for at least five years.