Mutual funds can be defined as investment schemes which well managed by professionals, usually run by a company that manages assets and brings both investors and groups of people to one place.
And invests their money in bonds, stocks, and other securities. Mutual funds are also known as equity funds and this is an easily accessible investment for common investors.
Mutual Funds are very complicated products, it is quite possible that new and first-time investors can become worried about mutual fund investment.
Nevertheless, you can start the mutual fund’s investment journey in an easy way by getting the knowledge of how the funds work and what to do in the mutual fund’s investment for a better return.
Mutual fund investment is the most popular investment at the current time and it is the best long-term investment option for building wealth. Investing in mutual funds can be a wise decision to create wealth and earn high returns without paying the tax at the same time.
The internet has made this possible for investors to invest in mutual funds and earn extra income. There are nearly a hundred thousand mutual funds in the market which makes the process of selecting the right funds difficult. It is also possible you can lose money if chosen the wrong mutual funds to invest in.
Understand How Mutual Funds Work?
If you are an investor then you could buy a mutual fund unit that generally shows your shares in a certain scheme. All the units could be bought or redeemed as required at the fund’s current net asset value (NAV). NAVs keep changing, accordingly funds holdings. Thus each and every investor take part in reciprocal the loss or gain of that funds.
All the SEBI registered funds, perform within the regulation of strict rules created to secure the investors’ interest.
The main benefits of starting investing in mutual funds are that it grants permission to small investors to invest in these professionally managed, various portfolios of equities, bonds, and other securities, that would be quite difficult to start with a small amount of capital.
Mutual funds investment is the type of investment where all the investor’s money comes under one place and is invested in the funds managed by the AMC (Asset Management Company). The AMC (Asset Management Company) invests this money in securities and bonds as per their need. The mutual funds are managed by the fund manager.
Fund Managers manage the money according to the market and invest in the funds so that they can create wealth for the investors. The fund house charges some amount from the investors which are called fund management fees.
Reasons to Choose Mutual Fund Investment
Below are the main reasons to choose mutual funds as an investment option.
- Easy to Invest – Mutual fund investment is quite easy because less paperwork is required to start investing and you can choose from various investment funds as per your requirement. The ease of switching between the funds whenever required keeps your investment alive and you can take benefit from your investment.
- Small Investment – Mutual fund investment can be started with a very low income which is ₹500 and chosen from various mutual funds investment options. Although, you can get access to the lump sum funds or choose from SIP (Systematic Investment Plan). SIP is much better than lump-sum funds investment because you can get lower investment management costs and take the benefits of compounding power.
- Tax Benefits – Tax benefits are given under Section 80C of the Income Tax ACT. Some of the mutual funds and instruments are given tax benefits. ELSS (Equity Linked Savings Scheme) is one of the best tax-saving investment schemes at the current time and in the last few years. ELSS has a very short lock-in period which 3 years.
- Funds Managed by Professionals – When the money is being invested in mutual funds all the money is managed by professionals also known as funds managers who are supported by a team of researchers. They divide the invested amount into different risk factor investments and allocate the necessary amount of a certain asset. The professionals access the real-time market situation and have good experience in investment. They manage mutual fund investments accordingly with the help of investment skills. Retail investors may lack the necessary investment skills and are more likely to lose money in mutual fund investments.
Important Points for New and First-time Investors
If you are a new investor and investing in mutual funds for the first time, you need to consider the below point before entering the mutual fund investment.
- Make an Investment Goal – Investment goals are necessary terms of investment success because without any purpose you cannot succeed. Budgeting and allocating money as well as the tenure of the investment can be decided later on. By setting your investment goals you can figure out your risk capacity.
- Select Correct Fund Type – Choosing the right mutual funds type investment is one of the reasons to get succeeded in the investment because the right type of mutual works well for your requirement if chosen properly. If you seek advice from an investment expert they suggest the most balanced and debt fund which has a low risk for first-time investors and gives better returns.
- Check and Select any one Mutual Fund – Once you have selected the mutual fund category now you need to choose the right mutual fund to invest in. There are hundreds of funds in one mutual fund category, choose one mutual fund which has performed well in the last 5 or more years. You need to take care of the fund manager’s experience and the expense ratio and the assets management.
- Diversify Your Investment Portfolio – If you are a new investor or an experienced you should choose more than one mutual fund to invest in making sure it does not cross the limit of 3 mutual funds at a time. Fund managers can help you to make your portfolio diversify and help you to choose the funds which can perform well for you in the future. By diversifying the investment portfolio you can reduce the risk because if one fund does not perform well others can perform well.
- SIPs are better than Lump Sum Investments – New Investors can choose the SIP (Systematic Investment Scheme) because it has less risk than the lump sum investment options. SIP can help you to earn higher returns compare to the other funds if you are a new investor. If you want to invest a big amount you can choose the debt fund to invest in.
- Keep KYC Document Handy – If you are entering the investment you might wonder what KYC is, it is the government regulation in India for most financial transactions. If you want your KYC done you should have a valid PAN card and valid address proof. Once your KYC is ready you can easily start investing in mutual funds.
- Get Access to Internet Banking – Mutual fund investors can be done through debit cards, cheques, and Internet banking. Internet banking most favorable and safest way to invest in mutual funds. With the help of Internet banking mutual funds investment become more convenient and easy.
- Ask Mutual Fund Expert – The process of choosing and investing in mutual funds can be lengthy work. Mutual fund investment needs to be checked on a regular basis for better performance. There are thousands of mutual to invest in. Sometimes you might need to switch between the funds not performing well for you. You can take the help of the investment expert and act accordingly.
Top 10 Mutual Funds Investment Companies in India
If you are interested in investing in mutual funds in India then you can choose one of the funds from the below list. The below-given mutual fund is the country’s topmost fund.
- Vande Mataram Bhusmani Advantage Fund
- Black Rocks Temple Tons Infrastructure Fund
- TOP to POT Rural India Growth Fund
- Focussed Gujarat Model Wealth Multiplier Fund
- Lynchman Sachs Cow Protection Fund
- Jumlanomics Large Cap Acche Din Fund
- Love Jihad Mid-Cap Skull Cap Fund
- Pick Your Sena Offended Sentiments Fund
- Live Life Kingsize Nirav-Vijay Financial Services Fund
- Hindu Rashtra Emerging Opportunities Fund