In these times of decreasing interest rates, mutual fund investments are resilient and holding its ground. In the Indian scenario, Banks and Post Offices have played a vital role in shaping savings and investment patterns as critical financial planning components. However, mutual fund investment has grown as a popular choice of investment for investors.
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A mutual fund is a type of investment instrument, wherein the fund houses or Asset Management Company (AMC) pool money from various investors and invest in market-linked securities like equity, stock, debt, etc. to gain high returns on investment in the long term. In mutual fund schemes the asset management company professionally manages the funds on your behalf through their expert fund managers. Let’s read further to know in detail about A-Z of mutual funds.
After understanding “What is Mutual Fund” it is time to learn about the different types of Mutual Funds and their varieties. Broadly, the Mutual Fund is classified as Equity, Debt, and Balanced or Hybrid Funds depending on their asset allocation and equity exposure.
Under this fund the investment is made in equity and equity linked securities. The minimum eligibility investment in equity under the scheme is 65% of its total portfolio. Equity funds are potentially the highest yielding investment under the influence of market forces, and thus, bear a matching risk factor. They are further classified as:
A mutual fund to be considered as a Debt Fund must invest 65% of its portfolio in debt securities. Some common securities are money market and fixed income treasury bills, government bonds, certificates of deposit, and similar other instruments. It is ideally suited for risk-averse individuals as market fluctuations do not influence its performance. The various types of debt funds are:
The name suggests that investments are made in a combination of equity and debt instruments to balance the risk-reward ratio. The fund manager diversifies the portfolio in sync with market conditions with the investor benefit’s primary objective while reducing the risk level. The different types of Hybrid Funds are:
Here are some of the reasons why you should invest in mutual funds.
The fund Houses or the AMC (Asset Management Company) pool in the money for the professional fund manager with excellent financial investment credentials takes over. He heads a team of analysts and experts who sift through the potential earners in the long run to build a portfolio.
Mutual Fund does not usually have a lock-in-period provision, except ELSS, which is locked in for five years. Most Mutual Fund schemes are open-ended, providing easy liquidity, subject to exit load on redemption.
The low-cost service is an added attraction if you are a small investor looking to earn a handsome return on your investment. The expense ratio imposed by the fund houses is in the range from 0.5% to 1.5% of the total investment, whereas SEBI mandates a maximum of 2.5%.
Mutual funds are lucrative option of investment for individuals who wants to multiply their savings and create a financial cushion in the long-term. Mutual funds offer investors a great way to diversify their portfolio. Thus, for investors who have different risk appetite can consider investing in mutual fund schemes in order to gain profitable returns on investment.
The right time to invest is a question that will crop up now and then far removed from what is Mutual Fund, as by now you are conversant with many of its facets. There is no auspicious time to invest in Mutual Funds. Regardless of the market behavior, the professional fund manager and his team of analysts are fully geared to choose suitable securities at all times to maximize your investment yield.
With the SIP mode, you are already the beneficiary of the rupee cost averaging mechanism. Moreover, there is no defined exit and entry time in Mutual Funds. Whatever your financial goals – short or long term or parking surplus funds, the best time to invest in a Mutual Fund is now.
Once one is clear with what is mutual fund, the investor must know the steps involved in mutual fund investment. Investing in a Mutual Fund is a simple process, but you need to follow a few cardinal steps to end with the suitable instruments to accomplish your financial goals. Before you start investing, you must consider the following:
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Some of the methods to invest in Mutual Fund schemes are:
All it takes to initiate your Mutual Fund investment is to visit the nearest fund house branch, along with the copies of supporting documents, the latest passport size photograph, and submit the completed application form duly signed.
Very much like the fund house, the broker will assist you in complying with the initial norms using the same set of documents to start your Mutual Fund investment. However, the broker will charge a small fee for the rendered service.
Most fund houses offer an online facility to help you initiate your Mutual Fund investment. The user-friendly mode will guide and help you navigate through the e-KYC process using your Aadhaar and PAN card.
Fund houses have designed a dedicated app to facilitate Mutual Fund investment and a host of post-purchase services. You have to download the app on your cell phone and navigate as prompted.
In recent times, mutual fund has gained huge popularity among investors. Today, it caters to a large section of the investing population with enormous investments for potentially high returns. Moreover, with the process of SIP one can continue to invest a small amount in mutual funds and gain higher returns in the long-term period. This article on what is mutual fund has covered almost everything to ease your hassles.