Mutual Fund meaning/ explanation- invest in mutual funds:

Mutual funds can appear difficult or unknown to several people, especially beginner investors. We’ll explain it here from the most fundamental level. A Mutual Fund is essentially a collection of money contributed by a big number of people (or investors). A professional fund manager is responsible for pooling the funds into mutual funds.

It’s a trust that collects funds from a group of participants with a shared investing goal. The money is then invested in stocks, bonds, money market instruments, and/or other securities. 

Units, which reflect a share of the fund’s holdings, are owned by each investor. By determining a scheme’s Net Asset Value (NAV), the returns earned from this mutual fund investment are split proportionately among the investors after deducting certain fees. 

Simply put, a mutual fund is one of the most viable investment options available to the average person since it allows them to invest in a diversified, professionally managed basket of securities at a reasonable cost.

Types of Mutual Funds:

The investing purpose, structure, and nature of the schemes are the categorizing elements of mutual funds. Mutual funds are divided into categories depending on their investing objectives: equities or growth funds, fixed income or debt funds, tax-saving funds, money market or liquid funds, balanced funds, gilt funds, and exchange-traded funds (ETFs).

The following are the mutual fund types:

Growth or Equity Funds: These mutual funds invest in equity shares with the goal of capital gains over the medium or long term. They are associated with high risks because they are associated with highly volatile markets, but they provide good profits over the long run. Diversified, sector and index funds are the three types of equity funds.

Debt funds: It is also known as fixed-income funds. Debt funds invest in fixed income or debt assets such as debentures, corporate bonds, commercial papers, government securities, and different money market instruments. Debt funds can be a good option for people looking for a stable, disciplined, and risk-free income. 

Balanced Funds – As the name says- these funds invest in both debt and equity securities. With these products, investors may expect a stable income as well as growth. They are a good investment choice for those who are willing to consider moderate risks than the medium or long term.

Tax Saving Funds – Tax saving funds are for everyone who wants to grow their money while also saving money on taxes. Tax saving funds, commonly known as equity-linked savings schemes (ELSS), allow investors to take advantage of tax rebates under Section 80C of the Income Tax Act of 1961.

ETFs (Exchange-Traded Funds) – An ETF is a stock exchange-traded fund that contains a basket of assets such as bonds, gold bars, oil futures, foreign currency, and so on. It lets you buy and sell units on the stock markets during the market timings.

Open-ended schemes – An open-ended scheme is one in which units are bought and sold- consistently, allowing investors to participate and depart at any time. The Net Asset Value/ price is used to buy and sell funds.

Closed-ended schemes – These schemes have a set unit price and can only sell a few units. Investors cannot exit the scheme before the term ends.

How to Invest in Mutual Funds online?

Investments in mutual funds can be made in a variety of ways. They are as follows:

Offline application through investment fund house/ broker

Through registered investment (fund) house:

You can invest in mutual fund schemes by going to the fund houses’ nearest branch office. You have to ensure to have the following documents with you –

  • Address Proof
  • Identity Proof
  • Canceled Cheque 
  • Passport Size photograph

You will then receive an application form from the fund house, which you must complete and submit along with the required documentation.

Through registered Broker:

A mutual fund broker, also known as a distributor, is someone who will assist you with the complete investment process. He will give you all of the information you need to make your investment, including the characteristics of various schemes, the documentation you’ll need, and so on. He’ll also provide you with advice on which schemes to invest in. He will charge you a fee for this, which will be taken away from your overall investment.

Online application through the official website/ mobile application

Through website:

Investing in mutual funds online is now available from most fund houses. All you have to do is follow the directions on the fund house’s official website, fill out the required information, and submit it. You can also complete the KYC process online (e-KYC), which requires you to enter your Aadhar number and PAN. The data will be checked in the backend, and once that is complete, you can begin investing. Most investors prefer the online procedure of investing in mutual funds since it is simple, quick, and hassle-free.

Through Mobile Application:

Many fund firms allow investors to invest through a mobile app that may be downloaded on their device. Investors will be able to invest in mutual fund schemes, buy and sell units, read account statements, and check other facts about their folio via the app. SBI Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund, Aditya Birla Sun Life Mutual Funds, and HDFC Mutual Funds are some of the fund firms that accept investments using mobile apps. Some apps, such as myCAMS and Karvy, allow investors to invest and track their investments from numerous fund houses all in one place.

Conclusion

Investing in mutual funds is one of the most straightforward strategies to meet your financial objectives on time. However, before you invest, give yourself enough time to research the various fund options. 

Don’t invest money into a specific mutual fund just because a colleague or friend has. Choose your financial objectives and make the essential investments to accomplish them. If required, you can seek the advice of financial experts to help you in making better investment decisions and securing your financial future.

Note: SIP does not guarantee minimum returns or capital protection. In deteriorating market conditions, SIP provides little protection against losses.