What Is Mutual Fund?
Mutual Funds are professionally managed investment schemes. Basically pools money from multiple investors that are professionally managed by expert Mutual Fund managers. Your money is invested in a group of investments (either stocks or debt instruments), and in a simple, as well as accessible manner. The fund managers keep a record of the performance and growth of these funds and make required alterations so that the funds perform well and the investors receive the best possible returns.
Mutual Funds are controlled by an Asset Management Company (AMC) that collects funds from a group of investors and invest these funds in bonds, stocks, and securities. When you purchase units of a Mutual Fund, these units denote the holdings of your share in a certain fund scheme. You can purchase or even redeem a Mutual Fund at the prevailing Net Asset Value (NAV).
Different types of Mutual Funds:
Equity Mutual funds: An equity fund is a type of Mutual Fund that invests money in stocks. There are both actively or passively managed funds.
Debt Mutual funds: A debt fund is a type of Mutual Fund that invests in fixed-income securities. Under this fund, money will be invested in short-term bonds, long-term bonds, securitized funds, floating rate debt, and money market instruments
Diversified Mutual funds: This type of Mutual Fund allows you to invest your money in diverse sectors or industries. You can spread your investments across various industries in the market.
Index Mutual funds: Under this category of Mutual Funds, your money will be invested according to how a stock market index functions. The NAV for these funds will closely follow the rise or fall in the index.
Hybrid Mutual funds: Under this category of Mutual Funds, your money will be primarily invested in debt and the remaining part will be invested in equity. It is a blend of both debt and equity investment.
Arbitrage funds: These funds are treated as equity plans for taxation purposes. These funds invest both in the cash market and the derivatives market.
Out of this Equity Mutual Funds are the most popular form of Mutual Funds.
How do they Work?
Equity Mutual Funds invest the investor money into stocks of various companies. The gains or losses arising from the rise or fall in prices of these shares in the stock market decide the performance of the Mutual Fund.
When an investor invests in an Equity Mutual Fund, the price that they pay for each unit of the fund is the Net Asset Value (NAV).
Net Asset Value is the book value of the fund. Book Value is the difference between what the mutual fund owns (assets) and what the mutual fund owes (liabilities). The assets are shares that the fund bought. Liabilities are made up of expenses that are incurred for running the mutual fund.
The NAV is directly impacted by the price fluctuations in the stock market.
The investment activities of a mutual fund, equity or otherwise, are professionally managed by fund managers. These fund managers are capable as well as qualified individuals who are selected after a thorough review.
How can you invest in mutual funds?
Investment in Equity Mutual funds can be made in two different ways
1. Systematic Investment Plan (SIP): If you save small amounts from your monthly salary, systematic investments are a good way to invest. It allows you to invest your money in a hassle-free and disciplined manner. The primary benefit of a SIP is that it builds investing discipline and helps you start even if you have small amounts to invest.
2. One time investment: If you have extra money, a lump sum amount
that you want to put away for future use, you can invest it all in one go.
BEST MUTUAL FUNDS
SBI Bluechip Fund
HDFC Balanced Fund
Mirae Asset India Equity Fund
SBI Magnum Multicap
Kotak Select Focus- Regular
Mirae Asset Emerging Bluechip Fund
L&T India Value Fund
Birla Sun Life India GenNext Fund
L&T Tax Advantage -Direct (G)
Motilal Oswal Most Focused Multicap 35 Direct-G
Kotak Nifty ETFnvestment in Equity Mutual funds can be made in two different ways
1. Systematic Investment Plan (SIP): If you save small amounts from your monthly salary, systematic investments are a good way to invest. It allows you to invest your money in a hassle-free and disciplined manner. The primary benefit of a SIP is that it builds investing discipline and helps you start even if you have small amounts to invest.
2. One time investment: If you have extra money, a lump sum amount
that you want to put away for future use, you can invest it all in one go.
BEST MUTUAL FUNDS
SBI Bluechip Fund
HDFC Balanced Fund
Mirae Asset India Equity Fund
SBI Magnum Multicap
Kotak Select Focus- Regular
Mirae Asset Emerging Bluechip Fund
L&T India Value Fund
Birla Sun Life India GenNext Fund
L&T Tax Advantage -Direct (G)
Motilal Oswal MOSt Focused Multicap 35 Direct-G
Kotak Nifty ETF