Understanding Mutual funds as a beginner

There are many investing options available these days, but only a few of them outperform mutual funds in terms of returns.

A mutual fund is a type of investment instrument that is gaining popularity among people looking to invest in market-linked securities. Here’s a Beginners guide on mutual funds for newcomers.

Mutual funds can appear difficult or Complicated to many people. We’ll try to break things down for you at the most Basic level. A Mutual Fund is a collection of money Pooled by a number of people (or investors). A professional fund manager is in charge of this fund.

It’s a trust that gathers 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 or NAV,” the income/gains earned from this collective investment are split proportionately among the investors after deducting certain fees. Simply put, a mutual fund is one of the most viable investing options available to the person since it allows them to invest in a diversified, professionally managed basket of securities at a reasonable cost.

A mutual fund is divided into many types based on risk, maturity duration, investing purpose, and other factors. In India, it is primarily classified according to the sort of underlying assets, which include:

An investor in an open-ended mutual fund can invest, enter, redeem, or exit at any time. It does not have a predetermined maturity date.

Mutual funds that are closed-ended have a set maturity date. Only during the initial time, known as the New Fund Offer or NFO period, may an investor invest or enter into these types of schemes. On the maturity day, his/her investment will be automatically redeemed. They have a stock exchange listing.

The equity mutual fund’s primary mission is to deliver capital appreciation for aggressive investors with medium to long-term investment objectives. Equities are the stocks of listed Companies, and they are extremely risky to invest in.However, this form of fund also promises high returns

Debt mutual funds are an excellent choice for conservative investors. Fixed-income investments, such as corporate bonds, government securities, debt securities, and money market instruments, are the main focus of investment. Debt mutual funds are a low-risk investment with consistent returns.

A hybrid mutual fund is one that combines equities and debt mutual funds. This sort of investment is the best option if you’re searching for moderate growth. The fund’s equity component is subject to market volatility.

1. Lowest Lock-in Period

Mutual funds have lowest lock-in Period i.e.3 years only when compared FD,ULIPs and PPF.The Investors also have an option to stay even after lock-in period.

2. Flexibility to invest in smaller amount

Another benefit of investing in Mutual funds is that it is Flexible in nature.Investors do not need to invest huge amount of money.As per an individual Cash flow Position investor can invest.If you are Salaried Individual invest through Systematic Investment Plan (SIP).You can invest Monthly or Quarterly through SIP its as per your comfort and budget.

3. They are easily accessible

Mutual funds are simple to invest in and purchase, and you can do so from anywhere in the world. An asset management company (AMC) provides funds and distributes them through several channels, including:

Brokerage Firms
Registrars like Karvy and CAMS
AMC’S Themselves
Online Mutual Fund Investment Platforms
Agents and Banks

4. No need of Demat Account

For investing in shares you require a Demat account.But when it comes to mutual funds you don’t require a Demat Account to buy or sell.

5. Different schemes are available

The best aspect about Mutual Funds is that you can invest as little as Rs. 500. And the limit can be whatever the investor wants to put in.

Before investing in Mutual Funds, the only thing to examine is income, expenses, risk-taking abilities, and investment goals. As a result, anyone from any walk of life, regardless of income, is free to invest in a Mutual Fund.

6. Safety and Transparency

All Mutual Fund products have been labelled since the adoption of SEBI standards. All Mutual Fund schemes will be color-coded as a result of this. This assists an investor in determining the risk level of his investment, making the entire investing process open and secure.

This color-coding system uses three different hues to indicate different levels of risk.

Low risk is indicated by the colour blue.
Brown denotes a high risk, whereas yellow denotes a medium risk.
Investors can also check the fund manager’s credentials, qualifications, years of experience, and AUM, as well as the fund house’s solvency statistics.

6.Lower tax on Gains

Under section 80C of the Income Tax (IT) Act, you can save up to Rs. 1.5 lakh in tax each year by investing in an equity linked savings scheme. All other sorts of mutual funds, depending on their type and duration, are taxed.

Before investing, it’s important to consider the many benefits that Mutual Funds offer. A thorough understanding of the advantages of mutual funds will result in greater future earnings.

The Securities and Exchange Board of India, or SEBI, oversees the mutual fund business. As the authority, an investor must meet the following eligibility requirements: •

• Any Indian citizen over the age of 18
• Non-Resident Indians (Non-Resident Indians)
• Individuals of Indian ancestry
• Businesses
• Trusts for charitable purposes
• Business organisations
• Trusts in the private sector
• Societies of cooperation
• Institutional Investors from Around the World

• Offline investment directly with the fund house
• Offline investment through a broker
• Online through the official website
• Through an app
• AMC Website
• Bank Website

• ICICI Prudential Focused Bluechip Equity Fund
• Aditya Birla Sun Life Small & Midcap Fund
• Tata Equity PE Fund
• HDFC Monthly Income Plan – MTP
• L&T Tax Advantage Fund
• SBI Nifty Index Fund
• Kotak Corporate Bond Fund
• Canara Robeco Gilt PGS
• DSP BlackRock Balanced Fund
• Axis Liquid Fund

Reference – https://www.bankbazaar.com/mutual-fund/Top-10-M...

This Article is recommended for Beginners who want to try their hands on Mutual Funds.Please do share your Valuable Knowledge on it in the comment Section.

Disclaimer: We are not SEBI registered. The information provided herein is for education purposes only. We will not be responsible for any of your profit/loss with this channel’s suggestion. Consult your financial advisor before making any decision.