What Is Mutual Fund And How To Invest In Mutual Fund.

WHAT IS MUTUAL FUND.


Mutual Funds is a much heard name nowadays. We hear about it almost daily. Sometimes an TV Pay Aid, sometimes an article in a newspaper or sometimes a poster in a subway. After all, what is Mutual fund and what is the benefit of the people? If you have ever seen its ad on TV, then you must have noticed that no company name ever comes. This is because our government wants us to invest as much as possible. Why we will talk about this in this post.


You do not need a DEMAT Account to invest in Mutual Funds. You can invest directly from your normal bank account.

HOW MUTUAL FUND WORKS.

Mutual Fund is an investment tool in which all the money is invested in one place by taking money from a lot of investors. In other words, a mutual fund is a type of financial vehicle made up of a pool of funds taken from many investors, and this money is invested in stocks, bonds, money market instruments and other assets.

The value of any Mutual Fund company is known by it and what kind of things it invests. Companies that sell Mutual Funds are called AMC (Asset Manageent Company). If seen in a way, Mutual Funds are the products of these companies that they give to the common people. A company has many products, similarly AMCs also have many funds.

The performance of these funds is reflected in the performance of the company. Every fund has a fund manager who manages the entire fund, that is, decide where to put the money and where not. These fund managers are people who have many years of experience. There are crores of rupees in every fund and these funds are invested in different places daily which is under the supervision of all fund managers.


WHY TO KNOW ABOUT NAV.

Each Fund has its own Net Asset Value (NAV). Just as every stock or a commodity has a price, the fund has a NAV which is the price of a unit of that fund. If any person takes fund, then they get units under this NAV.

TYPES OF MUTUAL FUNDS.

  • Open Ended -  Funds are funds that can be withdrawn at any time. If you have taken a fund and if you need money then you can withdraw money. Different funds have different terms and conditions for withdrawing money. For example, if you withdraw money from Equity Fund before one year, then you have to pay 1% Exit Load.

  • Equity funds- Equity Fund are funds that invest 80% of the AUM (Assets Under Management) stock market. 

Equity Funds are also divided into three parts :


Large Capital Fund - Funds whose money is invested in the shares of large companies. The risk is the lowest among these funds because all this money is invested in the shares of big companies. Shares of large companies do not fall or grow as fast. Therefore their return is also limited. These Funds are commonly called Bluechip Funds.

Mid Cap Funds - These are funds whose entire money is invested in both small and big companies. The money is invested in such a way that the returns are more than large cap funds. Return is more than large cap funds so the risk is also high.

Small Cap Funds - These funds are considered very aggressive funds. These funds are funded in small companies or, say, fast growing new companies. The returns of these funds are either very good or very bad but if you remain in this fund for a very long time then you can earn a very good return.


Balanced Fund - Balanced funds come in very safe funds. It consists of a stock component, a bond component and sometimes a money market component in a single portfolio. Generally, these funds are a fixed mix of stocks and bonds.



 Debt Fund - Debt Fund invests in fixed income instruments, such as corporate and government bonds, corporate securities, and market market instruments. This fund is also called Fixed Income Funds and Bond Funds.


Money Market Fund - Money Market Funds are those funds that invest in bonds that do not have maturity for more than 12 months and hence are very safe. 


Closed Ended Fund - Closed Ended Funds are funds that cannot be withdrawn at your own will. They have a duration which can be removed only after completion.

HOW TO INVEST IN MUTUAL FUND.

You can do two types of Investment.

1- Lumpsum - If you have big money then you can suck a fund and put all the money in it. You can choose any fund from a company and you can invest in it directly through an advisor or by going to the company's website.
2- Systematic Investment Plan - The method is considered very much in practice and very safe way. In this, you take a fund and keep giving some money every month by not paying for it together. SIP Anti is convenient that you do not have to go anywhere for it. Neither to deposit money nor to withdraw your money. Everything happens very easily as everything is online. 


This is all what is Mutual Funds, Its type and how to invest in mutual funds.

But, before you jump in with your money read and analysis thoroughly.

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