Mutual Funds investment Tips is a useful information you should know before trusting Mutual Funds Sahi Hai. It’s a jargon that is often used by investors, professionals, and bankers. Have you ever imagined how they work, and how best they can serve as an investment tool? So whether you are planning for your car, child’s education, wedding, or vacations, Mutual funds are a simple, tax-efficient, and effective tool to invest for these goals. In this article, we have tried to explain Mutual funds in the simplest manner.
What is Mutual Fund and how you can invest in this?
The word mutual implies to a group of people coming together and the fund is a sum of money saved or made available for a particular purpose. The term mutual funds means a group of people putting their money together to buy Shares or bonds, sometimes both together. Mutual funds collect money from investors and invest them on their behalf. The investments are spread across the wide section of industries, this ensures that risk is controlled. Because all stocks may not move in the same direction, the same proportion at the same time.
Why Mutual Funds Investment Tips Needed?
If you want to invest you can invest directly or hire a mutual funds advisor. Directly you will invest in a direct plan of mutual funds scheme. The advisor will invest in a regular plan of the scheme.
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If you are investing directly you can visit the website of the mutual funds or its authorized branches with relevant documents. The advantage of investing directly is that you don’t have to pay a commission to the advisor. But the drawback is you have to do the documentation, research, monitor investments all by yourself.
Types of mutual funds in India
1. Equity Mutual Funds: Mutual Funds Investment Tips
Equity mutual funds invest directly in stocks. It invests a major part of its corpus in stocks and the investment objective of these funds is long-term capital growth. Equity funds invest a minimum 65% in equity and equity-related securities. These funds may invest in a wide range of industries or focus on one or more industry sectors. These investments can give you a chunk of returns but it can be risky because it depends on the stock market. These types of investments are suitable for investors interested in the long-term.
2. Debt Mutual Funds
These schemes invest in debt securities such as bonds, corporate debentures, government securities, and money market instruments. Investors should opt for debt schemes to achieve their short-term goals that are below five years. Debt schemes are safer than equity schemes and provide modest returns. These funds are suitable for investors whose main objective is the safety of capital with moderate growth.
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3. Liquid mutual funds: Mutual Funds Investment Tips
Liquid Mutual funds are safest they invest in safer short-term investments such as Treasury Bills, Certificates of Deposit, and Commercial Paper for a period of less than 91 days. The aim of Liquid Funds is to provide easy liquidity, preservation of capital and moderate-income. These funds are ideal for individual investors looking for moderate returns on their surplus funds.
4. Balanced Funds
Balanced funds are often known as hybrid funds. These funds invest in equities and fixed income instruments in line with the pre-determined investment objective of the scheme. It is for investors who are looking for a mixture of income, safety, and modest capital appreciation. They generally have an investment pattern of investing around 60% in Equity and 40% in Debt instruments.
5. Based on the maturity period:
Open-ended Fund: Mutual Funds Investment Tips
Open-ended funds scheme allows you to redeem your money anytime. It is available for subscription throughout the year and investors can buy and sell units at Net Asset Value (NAV) related prices. These funds don’t have any maturity date.
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Close-ended Fund: Mutual Funds Investment Tips
A close-ended fund is a fund that has a fixed maturity period, e.g. 5-7 years. These funds are open for subscription for a specified period at the time of the initial launch. These funds are listed on a recognized stock exchange.
Interval fund: Mutual Funds Investment Tips
Interval funds combine the features of open-ended and close-ended funds. These funds may trade on stock exchanges and are open for sale or redemption at predetermined intervals on the prevailing NAV.
Mutual Funds Investment Tips and Benefits:
Diversification
The biggest advantage of investing in mutual funds is risk diversification. Mutual funds widen investments across various industries and asset classes. So the chances of loss are low as compared to the stock market.
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Liquidity: Mutual Funds Investment Tips
Another advantage of investing in mutual funds is the ability to get in and out with ease. In general, your money is available to you anytime you want to sell it.
Professional Management
When you are buying mutual funds, you are also choosing a professional money manager. This manager uses the money that you invest to buy and sell stocks that he or she has carefully researched. It is also best for investors who do not have the time or skill to manage their own portfolio can invest in mutual funds.
