A mutual fund is a properly managed investment fund that gathers money from many investors to invest in securities. Securities include stocks, money market instruments, bonds, and other assets. A mutual is the fund’s portfolio maintained to meet the investment goal.
Mutual Funds are the easiest method to grow your wealth.
MF’s are registered with the Securities Exchange and Board of India (SEBI) and thus, your investment is safe.
Types of mutual funds
Equity funds invest in shares of different companies. The investment in equity funds would make a profit when the share prices increased. But they get in a loss when the share prices fall.
Fixed income funds
A fixed-income mutual fund focuses on investments that pay fixed returns, like government bonds, corporate bonds, and much more debt investments. The main motive of fixed income is that the fund portfolio generates interest income, which it then passes on to the shareholders.
Alternative funds are a type of mutual fund that focuses on asset classes or strategies that are not part of stocks and bonds. Asset classes include currencies, commodities, real estate, preferred stocks, and convertible bonds.
A multi-asset class is also known as a multiple-asset class or multi-asset fund. It is a collection of asset classes such as equity, cash, or bonds) which is used as an investment. This investment contains more than one asset class that creates a group of assets.
Debt funds are also a type of mutual fund that invests in fixed income securities like bonds and treasury bills.
A hybrid fund is characterized by diversification among two or more asset classes. These funds invest in stocks and bonds.
Why Mutual Funds?
- Expert money management
Mutual fund companies have fund managers to choose the sectors, shares, and debt papers in which the investment would be invested. This decision is made by keeping the investors’ interest in mind.
- Lock-in period
The Lock-in period is the duration in which investors cannot withdraw or sell their investment.
- Low cost/cost-efficient
Mutual funds are a very affordable option that wishes to invest in small amounts.
- Reduce Tax Liability
The benefit of mutual funds is you can save income tax. You can reduce your taxable income by Rs 1.5 lakh under the Income Tax Act – 1961.
- Invest through SIP
If you don’t have enough funds to invest, then you must invest in a Systematic Investment Plan (SIP).
- Flexibility to switch funds
A good investor knows when to switch funds to stay ahead of the market.
- Investment based on goals
The investor invests in Mutual funds with a financial goal to achieve
Mutual funds invest in many asset classes and company shares to mitigate risk.
- High Liquidity
Mutual Funds offer liquidity. Because you are allowed to redeem your investment at any time.
- Flexible tenure
Mutual Fund comes with three years of the lock-in period. So it gives investors flexibility in their financial goals.
- Tax efficiency
Investing in MF offers two benefits such as tax deductions and wealth accumulation.
- Ease of trading
Buying, selling, and redeeming fund units at the current market price is quite simple.
- Ease of tracking
MF provides investors regular statements to track the performance of the funds.
- Investment Safety
Mutual Fund investment is 100% safe. So you can easily rely upon.
Who Should Invest?
Mutual funds make investing much easier. Each fund fulfills different goals. It is useful for those who don’t have enough time to research.
When To Invest?
Factors to consider before investing:
- You must have enough funds to invest.
- Duration of Investment
- Research about the Market condition
- Expected return
Advantages of Investing in Mutual Funds
- Professional Management of Money
- Economies of Scale
- Tax- Saving
- Pocket Friendly
Mutual Fund Eligibility
Anyone can invest in mutual funds. The smallest investment amount is Rs 500. Indians and NRIs can invest in mutual funds. You can also invest in the spouse’s name or child. Apart from this, partnerships, LLPs, Trusts, and Companies can also invest in mutual funds.