What is Mutual Fund?
you must have heard that sometimes what is a mutual
fund. Do you know how they work? If not, I will tell you about it today.
A very good and easy way to earn money by investing at least
at the rate of only 500 rupees per month in the mutual fund.
Its name itself shows what is a Mutual Fund? It is a fund in
which a lot of investors' money is put together mutually. This group of funds
is managed to earn the highest possible profits.
Mutual funds are the amount of money deposited by a large
number of investors. Funds deposited by an individual or entity of a company
are called mutual funds. In simple terms, Mutual Funds are an investment scheme
in which investors deposit a certain amount or amount of money and invest this
deposited in different sectors like government funds, in a scheme, stock
market, etc.
The funds deposited by the fund manager are invested in
different sectors. Mutual fund managers use their brains to make investments
and form a highly qualified group that decides when and where to invest money.
Mutual funds invest in many ways. Which determines its risk and return, when
many investors invest in a fund together, the fund is divided into equal parts
called unit or unit.
How does Mutual Fund work ?, Mutualfunds
Mutual funds are operated by professional fund managers, ie
professional managers, who invest the assets of the fund in such a way as to
generate capital gains or income for the investors of the fund.
Mutual funds pay the money to the fund house as the fund house appoints a highly qualified manager and instead deducts a certain amount from your profit. All Mutual Fund Securities are Rgistered from the Exchange Board of India (SEBI) which approves the Asset Management Company (AMC) for fund management.
History of Mutual Funds
The mutual fund industry in India started in 1963 with the
formation of the Unit Trust of India (UTI) on India at the initiative of the Reserve
Bank of India (RBI) and the Government of India. Its main objective was to
attract small investors and to make them aware of the topics related to
investment and market.
The UTI was formed in 1963 under an Act of Parliament. It
was established by the Reserve Bank of India. And initially, it worked under
the RBI. After that, in 1978 UTI was separated from RBI.
- The first phase of the development of Mutual Funds in India started in 1964.
- Public Sector Fund Entry started in the second phase from 1987
- The third phase started in 1993 which lasted till 2003. Private Sector Funds were approved in this phase.
- The fourth phase started in 2003 which is still going on. In 2003, UTI was divided into two separate phases. The first SUUTI and the second UTI Mutual Fund, which worked as per the rules of SEBI MF.
Know Before Mutual Funds Investment
Mutual Fund Plan, Mutual Fund Plan Duration
First of all, you have to decide what is the purpose of your
investment, how much you can invest, and how long you can stay in it. If you
have to invest for a year or two, then there will be separate mutual funds for
that. If you have to invest for 5, 7 years or more, then there will be other
mutual funds for that.
Although mutual fund schemes do not charge entry load, many
companies charge an exit load when withdrawing money from the scheme before a
specified limit, which can be up to 3%. So invest in schemes where the exit
load is low or not.
Risk-taking ability, Mutual Fund Risk
Once you have decided on the period of investment, then you
have to ask yourself this question about how much risk you can take for this
investment. Remember that for higher returns, more risk has to be taken, but in
investment not only returns are important, capital protection means that the
security of your invested capital also matters.
Suppose that you have made up your mind to invest in equity
mutual funds for a long period, but you cannot take the risk that the value of
your investment will fall, then you have to choose funds in which returns and
risks are balanced.
The previous performance of the fund
By the way, there is no guarantee that if a fund has
performed well so far, its performance will remain the same in the future. But
from the past performance of different funds, you can do a comparative study of
which fund has consistency in performance, and its performance fluctuations are
not very different from market and economy. This will help you choose your
favorite fund scheme,
Also, you will get an idea of the average returns so far
from different funds. You can also see the ratings given to these funds from
different rating agencies.
Types of Mutual Funds
How To Select Mutual Fund
If you have made up your mind to invest in a mutual fund,
then we should know how to choose a mutual fund, because there are thousands of
mutual fund schemes of dozens of companies in the mark.
Equity Mutual Funds.
An equity fund is a scheme that invests in shares. These are
also called growth funds. Investments made in the short term can be risky, but
investing in this scheme for the long term gives better returns. Investments
made in this scheme for a period of 10 years are considered more correct.
According to market capitalization, it is divided into 10 types such as
large-cap, mid-cap, small, and micro.
Debt Mutual Fund
These are low-risk mutual funds under which mainly
government securities which include bonds and treasury bills etc. Investing in
Debt Mutual Fund is much less risky than Equity Fund and is good for investors
who want to invest for a short time.
Hybrid Mutual Funds
These types of mutual funds have a mix of both debt and
equity. These are medium risk mutual funds. The Debt & Equity Ratio in
Hybrid Mutual Fund is determined by the fund manager and depends on the
required returns from the fund.
Direct Plan Vs Regular Plan
Mutual Fund Direct Vs Regular Plan
Distributor commissions are included in the regular
plan. These commissions range from 0.5% to 1% of the fund value. In other
words, 0.5% to 1% of your investment is paid to the distributor for these
schemes every year. Distributor commissions are not included in direct plans.
How to Invest Mutual Fund?
You can buy mutual funds both offline and online. Before
investing, you should do thorough research and decide which asset management
company you want to invest in. Also check different types of mutual funds,
their investment objective, portfolio, and past performance.
Mutual Fund is a very
good option to invest in banks where interest is becoming less. If invested for
a long time, it can become a means of getting the highest return on investment.
More and more people are investing in it. The main reason is that investing in
these schemes is easy.
To invest in Mutual Funds, you will have to fill a form that
you can fill online or offline, both from anywhere or anywhere. After this, you
can sell or buy funds both online or offline.
What is the unit.
When many investors invest in a fund together, the fund is
divided into equal parts called unit or unit.
What is nav.
The price of a mutual fund unit is known as Net Asset Value
(NAV) per unit. The fund's NAV is calculated by dividing the total value of the
securities in the portfolio by the total number of outstanding units. Mutual
fund units can usually be bought or sold at the current NAV of the fund.
What is SIP.
SIP is a Systematic Investment Plan, in which the investor
usually invests a predetermined amount per month.
Mutual Funds Advantages and Disadvantages
A mutual fund is a volatile market. In this, the
possibilities are as much as the advantages and the disadvantages. Below you
are told about the profit and loss of some important mutual funds in India.
Benefits of Mutual Funds
Mutual Funds Benefits / Advantages
Mutual funds have many advantages to attract and attract an
investor to a mutual fund. The biggest benefit of a mutual fund is that in the
long run, it gives you more benefits than FD.
Some of the major advantages are shown below:
- Low tax: - Before investing money, everyone gets to know about the tax on that investment, and it is also appropriate to do so because less tax is more profitable. Mutual funds are right for investing in low taxes.
- Secure Investment: - Mutual funds operate under the supervision of SEBI and it is a government institution. Through SEBI, we can get information about daily stock prices, past performance of stocks, eligibility of manager of the fund, etc.
- Risk reduction: - This investment gives a lot of variation which reduces the risk of risk. For example, if you take goods daily from the same shop, then you will not be able to buy goods when the shop is closed and you can complete your work by purchasing goods from any other shop as per your wish.
- Returns: - Investing in Mutual Fund gives you far more benefits than FD or savings account in the long run. If you want to invest money for 5 to 10 years then you must consider Mutual Fund.
- Management: - The biggest advantage of this is that you do not need to have knowledge of the stock market. Because the mutual fund is managed by a professional manager.
Mutual Funds Losses, Mutual Funds Deficit / Disadvantages
While there are many advantages to investing in another
mutual fund, on the other hand, there are also disadvantages.
- Just like there is no risk in the FD of the bank, it is not in the mutual fund, it also has risk, but the risk that is there when investing in the stock market is much less than the risk.
- Most mutual funds have more income than FD but sometimes it can happen that not only less than FD can also go into losses. This is rarely seen. There is some income.
- For a good income in mutual funds, one has to invest money for a long time.
