Mutual fund is not an alien term nowadays. Mutual funds are, in simple terms, investment vehicles comprising of the capital of various investors who share a mutual fiscal goal. These funds comprise of a pool of money accumulated for many investors to make investment in various securities such as money market instruments, bonds, stocks, and other assets. Professional money managers known as the fund managers operate mutual funds. Fund’s assets are allocated by these fund managers and they also attempt to generate income and capital gains for the investors of the funds.
All Services
Need Help ?
- F-1702, City Apartment, Aditya World City, Gaziabad, Uttar Pradesh
- +91 8104847188
- support@k99services.com
Request a Callback
Types of Mutual Funds in India
- Growth Funds
- Income Funds
- Liquid Funds
- Tax-Saving Funds
- Aggressive Growth Funds
- Fixed Maturity Funds
- Pension Funds
Advantages of Mutual Fund
Mutual Fund refers to a pool of money collected by various investors who intend to save and make money through their investment. The financial corpus so formed is invested in different asset classes, namely, liquid assets, debt funds etc. Much like profits and rewards earned during the tenure of investment, losses are also equally distributed among all the investors, i.e. in accordance with the proportion of their contribution to the financial corpus.
Mutual Funds are registered with the Securities and Exchange Board of India (SEBI). SEBI is responsible for regulating security markets prior to the accumulation of the funds from the investors. Making investment in Mutual Funds can be as simple purchasing or selling stocks or bonds online. In addition, the investors can also sell out their shares whenever they want or need.
Mutual Funds are registered with the Securities and Exchange Board of India (SEBI). SEBI is responsible for regulating security markets prior to the accumulation of the funds from the investors. Making investment in Mutual Funds can be as simple purchasing or selling stocks or bonds online. In addition, the investors can also sell out their shares whenever they want or need.
Different types of mutual funds operate slightly differently from one another, but they all have some basic principles on which they operate that define them as mutual funds.
The most basic way in which mutual funds operate is explained below:
The most basic way in which mutual funds operate is explained below:
- An asset management company (AMC)/fund house identifies a potential earning possibility in the market and calculates the risk and potential reward involved in this particular investment.
- The AMC studies other related investment opportunities that could boost the value of - or ensure the success of - the main opportunity.
- The fund manager working for the AMC picks and chooses different investments in order to balance out the risk and total earning potential - balancing the right high risk-high reward equities with high safety-relatively consistent income securities.
- All the details about the fund including risk factors are well documented and presented to the industry body SEBI for regulatory approval and to the public for consideration.
- The fund scheme is made available to the public, who then buy into the fund by purchasing fund units. The more fund units are purchased, the larger the investment, and thus the greater the proportion of potential income.
- The investments are made and, depending on the fund’s structure, the fund will either be passively or actively managed by a fund manager.
- Under the dividend option, declared dividends are proportionally distributed amongst investors. Under the growth option, dividends are reinvested for capital appreciation.
- At the end of the fund’s tenure, capital gains are paid out to the investors.
- Mutual funds investment can multiply your wealth.
- Minimal risk as compared to other investments.
- Portfolio diversification is possible - meaning that you don’t put all your eggs in one basket.
- More chances of success and profitable returns thanks to investment diversification.
- Mutual funds are actively managed and employ a professional fund manager whose performance parameters are directly linked to the performance of the fund scheme.
- ELSS investments can help you save up to Rs.1,50,000 from taxation under Section 80C.
- Mutual funds provide higher potential returns than any other type of investment avenue.
- Mutual funds can be invested through a method called SIP - Systematic Investment Planning - which carries a host of benefits to the investor.
