What is Mutual Fund? How to Invest- SIP, Types and Features

What Is Mutual Fund?

 

Mutual fund

A Mutual Fund is a trust collects money from many investors in various assets classes (Equity, Debt, Liquid assets, Etc.).

It Is Called ‘Mutual fund’ because all the Profit, Loss, risks and dividend from the investments are shared among all the investors according to their contributions.

 

Type of Mutual Fund?

There are a variety of mutual fund (MF), and it causes contribution to the people the following list help you to understand better.

 

Let us see the details of each type-

Large Cap Funds- These funds invest a large portion of their corpus in companies with large market capitalization. these funds generally offer stable and sustainable returns over a period of time. and funds are classified as “less volatile, less risk, less returns” type.

Midcap Funds- These funds invest a large portion of their corpus in companies with mid-size market capitalization. and funds generally offer medium returns over a period of time. and funds are classified as “medium volatile, medium risk, medium returns” type.

Small Cap Funds- These funds invest a large of their corpus in companies with small size market capitalization. these funds generally offer more returns over a period of time. and funds are classified as “more volatile, more risk, more returns” type.

 

A mutual funds is described as combination of the funds mentioned above for example.

  • A large cap open ended equity scheme with growth option.
  • A small cap open ended debt scheme with dividend option.
  • A large cap close ended balanced scheme with dividend option.

You can see the details about each type of mutual fund click here.

 

Features of Mutual Fund?

  • Schemes managed by professional fund managers, mutual fund offer a wide variety of schemes, that you can choose as per your needs and convenience.
  • This diversifies the risks by investing in a number of companies across a broad range of sectors.
  • These have the potential to deliver higher returns over medium to long term.
  • Mutual fund are relatively less expensive to invest in equities compared to directly investing in share markets.
  • Some of the MF scheme provide liquidity, it means you can take out the money whenever you want.
  • this is providing transparency in the form of disclosing the investment strategy, proportion of asset class for investment value of your investment and periodic statements.
  • Few MF schemes (Like ELSS) provide tax benefits.
  • This scheme provides SIP (Systematic investment plan) option for investors to invest small amount of money on regular basis.

 

Income Tax Benefits?

 

Income Tax

You need to know the following thing to get a good understanding for income tax benefits of mutual fund.

 

Who Regulates Mutual Funds?

Mutual fund in India is regulated by a SEBI (Security and Exchange Board of India).

The Objective of SEBI are.

  1. To formulate policies and regulates the MF.
  2. To protect the interests of investors in share market.
  3. To promote the development of securities market.

SEBI issues guidelines and revises policies from time to time to protect interest of investors in the equity market.

 

Who Can Invest in Mutual Fund?

  • Mutual fund scheme are open to a wide range of investors including resident individuals.
  • HUF (Hindu undivided family).
  • NRI (Non-Resident Indian).
  • PIO (People of Indian origin).
  • Companies.
  • Trusts.
  • Co-operative societies etc.

 

What is NAV?

Nav stands for “Net Asset value.”

  • Nav is the current market price of one unit of a MF scheme.
  • Nav is calculated on a daily basis for open ended scheme and weekly basis for close ended scheme.
  • Nav is calculated offer deducting all the expenses and charge incurred by the fund.
  • Nav value depends on the performance of the mutual fund scheme.

 

How to Invest in MF?

You can invest in mutual funds through one of the following ways.

Direct Investment- You can approach the MF scheme. Office directly and invest the money by completing necessary paperwork some MF schemes. Allow investment through their website & broker apps and it can be made conveniently from your home.

Advantage with this approach is that you will not be charged any transaction fee or commission fee. And your entire amount will be invested at the same time. It may be inconvenient to go to each and every MF company. If you wish to invest in various MF scheme.

Invest through Agent- There are many MF agents or brokers, and they can help you with various things on mutual fund like investment, redemption, answering your queries, completing necessary paperwork etc.

 

Conclusion

Overall, MF can be a valuable tool for long-term wealth creation and investment growth. however, it’s important for investors to conduct thorough research, assess their financial goal and risk tolerance, and carefully select fund that align with their investment objectives. consulting with the financial advisor can also provide personalized guidance. and help in constructing a-well diversified mutual fund portfolio.

 

Most Recommended Article:

Bonds : How it Works, Types, Risk and Benefits, Strategies

 

How to Pay Off Credit Card Debt – Step by Step Guide.

Summary
Mutual Fund-SIP
Article Name
Mutual Fund-SIP
Description
Mutual Fund is a trust collects money from many investors in various assets classes (Equity, Debt, Liquid assets, Etc.).
Author
Publisher Name
Financecalculate.com
Publisher Logo

11 thoughts on “What is Mutual Fund? How to Invest- SIP, Types and Features”

  1. Pingback: How many types of mutual fund and investment objective -

  2. Pingback: Income tax benefits.

  3. Pingback: WHAT ARE BONDS? -

  4. Pingback: WHAT IS HEALTH INSURANCE / -

  5. Pingback: Types of Mutual Funds : Investment Objective And Structure

  6. Pingback: Improve Your Credit Score Fast :10 Effective Strategies

  7. Pingback: How to Pay Off Credit Card Debt - Step by Step Guide.

  8. Pingback: How to build an emergency fund? A Step by Step Guide

  9. Pingback: What is an Underwriting? Definition, How it Works and Types

  10. Pingback: ETFs - Exchange Traded Funds : Meaning, Types, Benefits

  11. Pingback: ETF vs Mutual Funds : What's the Difference? -

Leave a Comment

Your email address will not be published. Required fields are marked *