What are Mutual Funds?
Mutual funds are one of the most preferred investment options these days. A mutual fund collects and invests funds from thousands of individuals who have a common investment objective. They are managed by Asset Management Companies that provide various mutual fund schemes to the public. Each mutual fund can invest money in stocks, bonds, Government securities and various other listed and unlisted assets.
How do Mutual Funds work?
Savings is more of a passive way of accruing wealth as the risk element is zero. On the other hand, investments are considered as an aggressive method of wealth generation. Investments in financial terms means the money spent today with the hope that it might reap more value in the future. There are multiple investment schemes available in the market. People invest money in various schemes with an idea to obtain a profit in the future.
Investments are significant in today’s ever-changing economic landscape. The investment enables you to build a corpus which is essential after you retire. It even acts as a saviour to your family in case of your demise. Tax depreciation is another objective that you can achieve through investments.
At FinFortune, the users can find investment schemes from various financial institutions in India that are safe and guarantee big returns.
What are the types of Mutual Funds?
In India, mutual funds are classified into three, namely Equity Mutual Funds, Debt Mutual Funds and Hybrid Mutual Funds. Each type has its own features, and the risk and returns vary.
Equity Mutual Funds
As the name suggests, investments in equity shares of the company fall under the category of Equity Mutual Funds. It has the potential to offer the highest returns among all types of Mutual Funds. The returns depend on the market situation. At FinFortune, we provide you options to invest in a variety of Equity Mutual Funds.
Debt Mutual Funds
Investments in debt, securities, and other fixed-income instruments fall under the category of Debt Mutual Funds. Risk-averse individuals mostly prefer it. The returns are comparatively less than equity funds as it’s not affected by market conditions.
Hybrid Mutual Funds
Hybrid Mutual Funds or Balanced Funds are the types of funds where the investment is split between equities and debts. The idea behind this combination is to balance the risk-reward ratio as your investments are diversified. It is the best instrument available currently to diversify your portfolio.
Why should you invest in Mutual Funds?
When you invest in a mutual fund, a fund manager from the AMC manages the investment of the funds. Since you are not directly involved in the market, you are saving on the transaction costs. Additionally, you avail the expertise of a professional fund manager with experience in managing investment portfolios. The fund manager receives assistance from his team of analysts and experts, who help them pick the best stocks that can give significant returns.
Unlike direct stock investments, mutual funds invest in a diverse portfolio to prevent concentration in one particular sector. This reduces the risk of being over-invested in one specific industry. If one set of assets under-performs, gains from other investments could compensate, so you don’t have to worry about market volatility, unlike in direct stock purchases.
If you don’t want to invest big, then mutual funds are your easy option. Most Asset Management companies levy a small service charge (typically 0.5-1.5%) on their customers for managing their funds. It is a much cheaper and safer option than investing directly in the market.
Most Mutual funds in the market do not carry a look-in period. These days, many mutual funds come with no exit load, and the investors can exit the fund any time they want without being charged.
When you invest in a mutual fund, a fund manager from the AMC manages the investment of the funds. Since you are not directly involved in the market, you are saving on the transaction costs. Additionally, you avail the expertise of a professional fund manager with experience in managing investment portfolios. The fund manager receives assistance from his team of analysts and experts, who help them pick the best stocks that can give significant returns.
SIP or Systematic Investment Plan is very popular among investors today. You can start a SIP with an amount as low as Rs.500 to be invested monthly, quarterly or half-yearly. SIP is an immensely beneficial plan for wealth creation. Once you apply for a SIP, the amount is automatically debited from your bank and invested in mutual funds you opted for periodically, and you will receive units based on the NAV of the mutual fund.
One of the most significant advantages of investing in mutual funds is that your investment is easily trackable. AMCs provide regular statements to investors about their investments making tracking and managing their finances easier.
Mutual fund plans come under the purview of the Securities and Exchange Board of India (SEBI). Some types of funds need RBI permission as well. Aside from these Government regulatory bodies, there is also a self-regulatory body called Association of Mutual Funds of India (AMFI) that has its rules and code of conduct for mutual funds and AMCs. Therefore, you can feel safe about your mutual fund investments.
How to Select the Best Mutual Fund?
Before investing in Mutual Funds, you must have a clear and compelling idea of your financial goals for the future. There are a few other factors that you should keep in mind before choosing a plan.
You should always invest in any sector with an eye towards the future. Whether you are looking for a short-term profit or long-term benefit like a retirement corpus, you must be clear about your financial goals. Investing without a plan can lead to massive financial mismanagement. If you are a risk-averse individual, it’s better to go for less risky funds but provide decent liquidity.
Once you select the best mutual fund category, you should opt for the top-performing mutual fund in that category. Analyzing the returns over some time is the best way to know if that mutual fund would be beneficial to you or not. If the fund has shown better returns over five years, it could be the right choice.
Choosing the best mutual fund also depends on your risk appetite. If you have a high-risk appetite, you can choose equity funds that may provide you with higher returns. On the other hand, if you are a conservative investor who is wary of taking risks, it’s better to opt for a debt fund or a large-cap equity fund.
The higher the value of total assets in a fund, the chances for the returns are better. A large AUM (Assets under Management) also indicates investors’ trust in that fund and its performance.
Mutual Fund Investment Modes
If you want to invest in mutual funds, you have two modes of investments – lump sum and Systematic Investment Plans (SIP)
Lump Sum Investment : As the name indicates, it involves a one-time investment. If you have a sizable disposable income in hand, you can go in for lump sum investment.
Systematic Investment Plans (SIP) : Systematic Investment Plan or SIP allows you to invest money at periodic intervals. Investors can facilitate transfer to their SIP through the auto-debit feature from their savings account.
How to buy Mutual Fund online at Fincover?
Investing in mutual funds has never been so easy. We have handpicked the best mutual funds that meet your needs and expectations. We have collated the best performing mutual funds in our platform. You can easily invest in mutual funds by following these simple steps:
- Log in to Fincover.com
- Click on “Banking Products” and select “Mutual Funds”
- Complete your KYC process
- Search and choose the most suitable fund among the handpicked plans
- Fill in all the mandatory details
- Choose the preferred mode of investment (SIP or lump sum)
- Select the tenure and size of your SIP
- Link your bank account
- Complete the purchase on our payment page
Check your email and take a printout copy of the acknowledgement