HOW TO INVEST IN "MUTUAL FUNDS"?
A GLIMPSE ABOUT MUTUAL FUNDS
The formation of mutual funds takes place when the funds are collected from different investors & then are invested in different sources like shares, stock or bond. As it is collectively managed so that the highest possible return can be earned & for that a professional manger is there who looks upon to the whole investment & takes the decisions accordingly so that they could earn the maximum return on that, as mutual funds is one of the best ways in which we can allocate our funds in the right direction.
BENEFITS OF INVESTING IN MUTUAL FUNDS
- It allows everyone to make a small investment.
- Higher returns, better than investing in some other sources.
- As it is collectively managed, so money is collected from different investors.
- Well regulated by SEBI.
- Professional managers manage it.
So these are the benefits of investing in mutual funds as this is one of the best ways through which you can maximize your wealth & also it is quite safe because all mutual funds are registered with SEBI. So it can be said that it is professionally managed & the protection of funds is also there.
TYPES OF MUTUAL FUNDS
As the classification of mutual funds is done based on investment traits they carry & also based on the risk factor involved with them. They are generally classified based on 3 broad categories that are:
EQUITY FUNDS
In it, the funds are collected from the investors & the collected fund are invested into the shares of different companies so when the price of the shares in which the investment has been made rise the investor can make the profits & vice-versa. Investors who are interested in taking high risk & investors who want to invest for a long time purpose can invest in it as it is beneficial for such type of investors.
DEBT FUNDS
They are basically fixed income government securities like Treasury bills, Bonds & other government securities like that in which an investor can invest in, because through investing in it the investor can earn fixed amount of income as it is for those type of investors who are not interested in taking the risk & want to invest for a short time span than for them it is perfect to invest in.
BALANCED OR HYBRID FUNDS
It means the allocation of resources in types i.e. debt funds as well as the equity funds so that the risk factor can be maintained & with it a return rate can also also be balanced out & this ratio is decided by the professional manager who undertakes the investment of the hybrid funds. They are mostly preferred by the people because they tend to get balanced out.
WHY YOU SHOULD GO FOR MUTUAL FUNDS?
As mutual funds have got many special features to offer that why more people go for it as it offers many benefits to the investors that's why people like to invest in the mutual funds.
1. Quite safe & secured.
2. Money is managed under great expertise.
3. Helps in doing systematized planning for the investments.
4. It involves diversification which makes it different from others.
INVOLVES LOW COST
If some do not want to make large investments initially then that person must invest in mutual funds because it is affordable if someone wants to make small investments in the beginning. As in it, a nominal fee is to be charged by the fund houses called expense ratio as it ranges from 0.5% to 1.5% normally & it can't exceed 2.5% as per SEBI regulations when the investor invest in then the expense ratio gets to deduct from the invested money.
HIGHLY LIQUID
As mutual investments are highly liquid you can redeem your money whenever you like, you just need to place a request with the fund house without any reason & your money will be credited within 2 to 3 days of placing the request.
EXPERT MONEY MANAGEMENT
As investors are not aware of technical know-how that takes in the stock market & also they don't have the much time to devote to it so mutual investments are managed by the professional managers who on regular basis invest the money which they have pooled from different sources. So an investor can freely invest in because the decisions taken by the professional managers are always in the interest of the investors.
LOCK-IN PERIOD
It differs for every mutual fund starting from one month to none at all. for instance: ELSS is a tax saving mutual fund scheme which has got the shortest locking period of 3 years. The longer the locking period will the chances of getting better returns improve & shorter the locking period the chances of getting better returns reduces.
SIP OPTION
If someone is not interested in doing one-time investment than they can go with the SIP option as systematic investment plans are beneficial for such type of investors who wants to make small & manageable installments then SIP is the best option to go with. It is the best option for low income as well as mid-income investors because in it they can with the investment as low as Rs.500 with clear tax.
DIVERSIFICATION IN MUTUAL FUNDS
As in it the investment of funds done by the professional managers through many different sources like company shares, assets & also according to company size as well so there are many diversify ways through which the investment is to be made so that if investment suffers loss on one side it can even out it because the investment is made in some other sources also where it is making out profits so it is to be called as diversification in mutual funds.
GET BETTER RETURNS WITH MUTUAL FUNDS
Suppose you have invested in RS.10000 monthly for 20 years & you have invested in different options. The return on investment you will get on different sources will be as follow:
IN BANK
3.65 LAKH
@4% P.A.
IN FIXED DEPOSIT
4.82 LAKH
@6.5% P.A.
IN GOLD
4.3 LAKH
@5.5% P.A.
IN MUTUAL FUNDS
15.2 LAKH
@ 15 P.A.
Now, through this, you can yourself identify which option is the best option among all the investment options as through above you can see that best return on investment we can through mutual funds only among all the above mentions options. Now, we can clearly say that mutual fund is the best option as it gives you better returns than those of others that's why you should use it upon other options that are available to you so that you can put your investments in the directions.
Now, it is easy to be a certified professional with NIFM. We have exclusively developed courses for those who want to do certification in Mutual Funds. We categories our courses:
- Mutual Fund Beginners Courses NSE NCFM Certification
- Mutual Fund Advanced Module NSE NCFM Certification
- Classroom Courses - Best Stock Market Courses for Trading & Investment
HOW TO INVEST IN MUTUAL FUNDS?
DIRECT INVESTMENT
Investors, who want to invest, can directly contact the fund houses if they want to invest in any scheme then for that they can contact the fund houses & can save the brokerage charges.
For that, you need to follow certain steps like:
1. You have to go to the nearest branch of any fund house that's available near to you.
2. You have got a form from them & you have to download that form online.
3. Then take the printout of the respective form & form print should be clear enough before you submit it.
Note: Clear all your queries before investment. Be clear with the terms & conditions of the investment.
AGENTS
They are the sales professionals & they must find the potential customers & inform them about the different fund options that are available to them .you can choose your funds based on risk, income & investment goal. The agents can help you with the applications, redemptions, cancellations & many other transactions they are basically to help you out whenever you face any difficulty & for the services they provide to their customers for that they charge a fee called commission.
ONLINE (DISTRIBUTORS/FUND HOUSES)
Buying & selling mutual fund units is seen almost everywhere & that's why people like to invest online these days.This not only saves time and effort but also makes it easy to compare funds and make informed decisions. Clear Tax is one such portal that handpicks the best mutual funds from the country’s top fund houses for you at zero costs. Just enter your details and make the online payment in less than 5 minutes.
Written by: Laxmi (Intern at NIFM)
2024(2)
