Everything you should know about Mutual Funds….!

What are Mutual Funds?

Mutual funds are a way of investing money where lots of people put their money together to buy different types of things like stocks and bonds. A professional manager makes decisions about what to buy and sell based on what the fund is trying to achieve

Mutual Funds
Credit-UTI Funds

How mutual fund works

When you invest in a mutual fund, you are combining your money with other people’s money. The mutual fund gives you “units” in exchange for your investment at the current value. You can make money from the mutual fund through income distributions, which are payments made to investors from things like dividends or capital gains earned by the fund. If you sell your units for more or less than what you paid for them, you can also make a profit or a loss.

How mutual fund works
Credit- Zfunds

Does investment in Mutual fund is safe?

Yes, Mutual fund investment is safe. But you should need to evaluate the scheme before investment.

Why invest in mutual funds?

People have different goals for investing their money, like saving for retirement or paying for their children’s education or a house. Different investment products are needed to achieve these goals. Mutual funds can be a good choice because they let you invest in a variety of things like stocks, bonds, and government securities. This can help you benefit from the growth of the stock market. Another advantage of mutual funds is that a professional manager makes the investment decisions for you, and they usually charge lower fees than if you were to invest in individual securities on your own.

How many types of mutual funds?

Mutual funds come in many varieties, designed to meet different investor goals. Mutual funds can be broadly classified based on the –

  1. Organization Structure – Open-ended, Close ended, Interval
  2. Management of Portfolio – Actively or Passively
  3. Investment Objective – Growth, Income, Liquidity
  4. Underlying Portfolio – Equity, Debt, Hybrid, Money market instruments, Multi-Asset
  5. Thematic / solution oriented – Tax saving, Retirement benefit, Child welfare, Arbitrage
  6. Exchange Traded Funds
  7. Overseas funds
  8. Fund of funds

What is Expense Ratio?

According to the rules made by SEBI (an organization that regulates securities markets in India), mutual funds can charge some fees for managing their funds. These fees can include things like advertising, administrative costs, fees for managing investments, and audit fees. The fees are usually a percentage of the total amount of money in the fund on a given day.

All such costs for running and managing a mutual fund scheme are collectively referred to as the ‘Total Expense Ratio’ (TER)

What is the Risk in Mutual funds?

  • It’s important to know that investing in mutual funds doesn’t guarantee you will get a certain return. There are risks involved, like the risk of losing the money you invested. The value of your investment may also go up or down based on changes in the stock and bond markets. Other things, like changes in interest rates, government policies, and economic developments, can also affect the value of your investment. It’s also important to remember that just because a mutual fund did well in the past, doesn’t mean it will continue to do well in the future.

What are the advantages of investing in mutual funds?

  • Professional Management.
  • Risk Diversification
  • Affordability & Convenience (Invest Small Amounts)
  • Liquidity
  • Low Cost
  • Well-Regulated
  • Tax Benefits

What is NAV in Mutual funds?

NAV stands for Net Asset Value. The performance of a mutual fund scheme is denoted by its NAV per unit.

NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on a given date. For example, if the market value of securities of a mutual fund scheme is ₹200 lakh and the mutual fund has issued 10 lakh units of ₹ 10 each to the investors, then the NAV per unit of the fund is ₹ 20 (i.e., ₹200 lakh/10 lacks)

How to apply for Mutual funds

  • One can invest in mutual funds by submitting a duly completed application form alongwith a cheque or bank draft at the branch office or designated Investor Service Centres (ISC) of mutual Funds or Registrar & Transfer Agents of the respective mutual funds.
  • One may also choose to invest online through the websites of the respective mutual funds.
  • Further, one may invest with the help of/through a financial intermediary i.e., a Mutual Fund Distributor registered with AMFI, OR choose to invest directly i.e., without involving or routing the investment through any distributor.

What is a SIP (Systematic Investment Plan)?

A systematic Investment Plan (SIP) is an investment plan (methodology) offered by Mutual Funds wherein one could invest a fixed amount in a mutual fund scheme periodically, at fixed intervals – say once a month, instead of making a lump-sum investment.

The SIP installment amount could be as little as ₹500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month.

What is the top platform for mutual funds?

  • NJWealth
  • ClearTax-Black
  • Groww
  • CAMS
  • Zerodha Coin
  • PayTM Money

How to start Mutual Fund/SIP investment?

While starting into investment in mutual funds, you need to apply with the help of a broker or sub-broker. This mutual fund account opening needs a PAN card, Adhar Card, Bank Details, and Registered mobile number.


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