About MUTUAL FUNDS
What is Mutual Funds?
A Mutual Fund is a trust that collects money from many investors and invest in various asset classes like equity, debt and liquid aeset etc.
It is called "Mutual" because all th profit, loss, risks and dividends form the investments are shared among all the investors according to their contributions.
What is SIP?
SIP stands for Systematic Investment Plan.
SIP is a systematic method of investing your money in Mutual Funds.
A SIP is a planned approach towards investments and it helps you to develop the habit of saving and building wealth for the future
Types of Mutual Funds
There are a variety of mutual funs and it causes confusion to common people. The following list will help you to understand better
Types of Mutual Funds by Company Size:
- Large Cap Funds
- Mid-Cap Funds
- Small Cap Funds
Types of Mutual Funs by Structure:
- Open ended schemes
- Closed ended shemes
- interval shemes
Type of Mutual Funds by Investment Objective:
- Equity schemes
- income or Debt schemes
- Balance shemes
- Money Market or Liquied schemes
- Tax saving schemes
- Gilt schemes
- Index schemes
- Sector Schemes
- Exchanged Traded Funds
- Fund of Funds schemes
Types of Mutual Funds by Payout:
- Growth shemes
- Dividend Payout schemes
- Dividend Re-investment scheme
Features of Mutual Funds
- Schemes managed by professional fund managers
- Mutual Funds offer a wide variety of schemes that you can choose as per your needs and convenience
- Mutual funds diversify the risks by investing in a number of companies across a board range of sectors
- Mutual Funs have the potential to deliver higher returns over medium to long term
- Mutual Funds are relatively less expensive to invest in equites compared to directly investing in share markets
- Some of the Mutual Funds schemes provide liquidity. It means you can take out the money whenever you want
- Mutual Funds provides transparency in the from of disclosing the investment strategy, proportion of asset class for investment, value of your investment and periodic statements
- Mutual Funds are regulated by SEBI
- Few Mutual Funds schemes (ELSS) provide tax benifits
- Mutual Fund schemes provide SIP (Systematic Investment Plan) opton for investors to invest small amount of money oon regular basis
Advantages of Mutual Funds
Advanced Portfolio Management
When you buy a mutual fund, you pay a management fee as part of your expense ratio, which is used to hire a professional portfolio manager who buys and sells stocks, bonds, etc.1 This is a relatively small price to pay for getting professional help in the management of an investment portfolio.
Dividend Reinvestment
As dividends and other interest income sources are declared for the fund, they can be used to purchase additional shares in the mutual fund, therefore helping your investment grow.
Risk Reduction (Safety)
Reduced portfolio risk is achieved through the use of diversification, as most mutual funds will invest in anywhere from 50 to 200 different securities—depending on the focus. Numerous stock index mutual funds own 1,000 or more individual stock positions.
Convenience and Fair Pricing
Mutual funds are easy to buy and easy to understand. They typically have low minimum investments and they are traded only once per day at the closing net asset value (NAV).
This eliminates price fluctuation throughout the day and various arbitrage opportunities that day traders practice.
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