If you are reading right now then you must be either interested in investment related issues or looking to invest in mutual fund further ahead. Then I must say, you are in a perfect place to grasp knowledge about mutual funds.
This article will provide all the information from scratch to the expert level regarding mutual funds. Moreover, I can assure you that you will be quite confident and will possess a positive outlook towards investment sector after reading the post.
Just give a few minutes to this article and you will inhale all the valuable wisdom which gives you an edge over most the people related to this field. I know how boring it can be an uphill task of learning about the finance sector, stocks, bonds, mutual funds, etc. Moreover, with the hectic busy schedule, time is also a factor which is holding us back to grow and learn.
So that’s why we tried to provide you every information possible regarding mutual funds.
Without wasting much of your time lets embark on.
What is mutual fund?
A mutual fund is an investment alternative in which thousands or even lakhs of investors like you and me pool or put their money. After that, a fund manager( professional in the finance sector) uses that money to buy stocks, bonds or other equities of different companies across varies sectors.
So a single mutual fund can contain stocks of different companies from a single sector (for example IT sector) or stocks of different companies from different sectors( for example IT, health, food, etc) or a mixture of stocks, bonds, other equities all in one.
It all depends upon the type of mutual fund.
So, if you have lack of resource, time and efforts to buy to stocks or bond of different to companies, instead, you can simply buy a mutual fund and rest your fund manager will do your investing process for you.
NAV( net asset value)
NAV is calculated for every mutual fund as it tells about how good or bad a mutual fund can be. It represents a fund per unit market value.
This is a price at which investors buy or sell fund units from fund company.
Formula: NAV= FUND ASSET – FUND LIABILTIES / NUMBER OF SHARES OUTSTANDING.
For more about NAV: click the link
Why mutual funds?
Types of mutual funds?
Mutual funds are classified into majarly two broad categories:
- BY INVESTMENT OBJECTIVE
- BY CONSTITUTION
Let us trow some light on each one of them
By investment objective
Types by company size
These funds invest a major portion of their money in companies with a large market capitalization ( usually companies with turn over more than 10bn USD).
Stable and sustainable returns.
Less risk and returns.
Mid cap funds
They invest most of their money in companies with mid-size capitalization( mid-size companies)
Medium returns over a period of time.
Both medium risky and medium returns.
Small cap funds
These funds primarily focus on small companies, showing some growth but there is risk attached to it.
By investment objective
These schemes generally invest a majority of funds in equities (shares), hence, they are high-risk investments.
Suitable for long term.
Not suitable for the ones who want to become immediate rich.
These schemes mostly invest in fixed income securities like bonds, government securities, etc.
Less risk, less returns.
They provide fixed regular income just like fixed deposit in banks.
These are suitable for short term as in long run equities schemes will outrun them. So I recommend this scheme, for retired individuals.
They usually invest both in equities and debts.
Medium risk and returns.
I recommend this scheme for the one who needs moderate returns without much risk.
These schemes invest in safe and short term instruments such as treasury bills, certificates of deposit, etc.
Moderate income an provide protection to your investment.
Tax saving schemes
These schemes provide tax benefits to investors. They are made in such a way thus by investing these schemes provide maximum tax benefits to investors.
They comes with specific time period and mainly invest in equities.
These mutual funds invest in shares which are represented on an index such as BSE, NSE index, etc.
Mostly companies represented on index are prominent, well know and stable.
There is not much fluctuations, so risk is less and returns are also good.
Open ended schemes
These schemes do not have a fixed maturity period means you can buy or sell the units of these mutual funds anytime.
Close ended schemes
They have a fixed maturity period means you can sell or buy units of these schemes at a particular time of the year only.
They are a combination of both open and close-ended schemes. You can buy or sell units of these mutual funds at predetermined intervals.
How do mutual funds work?
How much you can earn from mutual funds
It is only written to give you guys an idea on how much you will earn, if you invest over a particular period of time.
Let us assume we go for sip plan( means you are investing or putting a particular amount every month) in mutual fund and we invested 3 thousand indian rupee every month over a time span of 20 years .
Here are the results
Here, we expected return of 15%. It may vary.
SIP calculator :
Apps and websites
This investing app is my personal favorite. You can download it from both ios and android store. Its free of cost and set up process to open an investing account is quite easy and fast.
One thing that gives this platform edge over others is that you can very easily buy mutual funds of different companies under a single roof. So you don’t need to go to different companies website to buy their respective mutual funds.
You can buy from a variety of mutual funds according to your preferences whether it is a direct plan, tax saving fund or sips or lump sums. Moreover, detailed information is been provided about every mutual fund with a blend of beautiful and easy to digest infographics of past records and sectors they put money into, etc.
Is quite a good news for all of you who wants to buy mutual funds as paytm recently launched its mutual fund services. Account setup is very easy and fast with add on benefits like “no commission”, “safe and secure, ” transparent tracking”, “data privacy” and much more.
It is one of the most popular website related to investing. Here you can view detailed informations of various stocks, bonds, mutual funds, etc. The content provided here is detailed and categorized, so it’s easy to understand.
Things to look at before buying a mutual fund
MUTUAL FUNDS FOR 2019
With flower comes the stones. Not everything about these schemes is perfect. There are some things you should give a thought before indulging yourself in these investment opportunities.
- Mutual funds entirely depend on the market condition. so there is a fixed guarantee.
- Fund companies or brokers charge investors for various services such as transaction charges, exit charges, annual charges, etc.
- Mutual fund companies charge the investors no matter how bad a fund performs.
- All the money collected after pooling is not invested in the market, some cash in hand is also there in companies
In the end, all we can say, start investing at an early age because investing works like compound interest, the earlier you start the wealthier you become. Every minute pass by is missed opportunity to gain wealth.
Hope you liked our article and inhaled some valuable information from this.
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