What is Mutual Fund?

Do you also want to know what is Mutual Fund? So today in this article you are going to get a lot of information about Mutual Funds, which will be very useful for you. So read this article thoroughly and completely.

Friends, Mutual Funds are one of the increasingly popular investment options in today's time. It is an instrument in which the investor gets the option of investing according to his convenience.

He can invest either in a lump sum or monthly through a Systematic Investment Plan (SIP). In today's time, you can also invest only Rs 100 monthly through SIP.

Short-term investments in mutual funds always carry the risk of losing profits, especially when investing in equity-oriented funds, except in balance and debt funds. But the returns on long-term investments in the last few years cannot be ignored. Long-term investments in mutual funds are attracting a lot of investors.

A mutual fund is a company that collects money from different people, which it invests in stocks, bonds and other financial assets. All these combined holdings (Stocks, bonds and other assets) of that company are called the Portfolio of that company.

What is Mutual Fund?

In mutual funds, money is collected from different investors and this money is invested in the shares and bond markets. That is, the money of many people is invested in one fund. Which is called Mutual Fund.

Units are allotted to the investor for his money. Now mutual fund houses distribute the profits of buying and selling shares or bonds in proportion to these units among the fund (unit) holders.

Mutual fund holders get this dividend after deducting all the expenses incurred on the dividend fund such as AMC (Asset Management Company) charges, admin expenses, agent's commission etc.

Usually, mutual funds are launched in the market from time to time under a scheme. Any mutual fund must register its name with the Securities and Exchange Board of India (SEBI).

A mutual fund is a type of financial vehicle that is made up of money collected from several investors with similar objectives and through which it is invested in securities such as stocks, bonds, gold, and other assets. Mutual funds are created by Asset Management Company (AMC).

In simple language, you give your money to AMC and AMC collects money from many people like you. So that company invests all this money in different places by taking the opinion of its expert (Professional Fund Manager).

How to Invest in Mutual Funds?

You can invest directly from the website of any mutual fund. Or you can also invest in mutual funds through apps like PhonePe and Paytm. Or if you want, you can also take the service of a mutual fund advisor.

If you invest directly then you can invest in direct plans of mutual fund schemes. If you are investing with the help of an advisor, then you invest in a regular plan of a mutual fund scheme.

If you want to invest directly then you have to visit the website of that mutual fund. You can also go to his office with your documents.

The advantage of investing in a direct plan of mutual funds is that you do not have to pay a commission. Hence your returns are greatly increased in long-term investments. One problem with investing in mutual funds in this manner is that you have to do your research.

What is NAV in Mutual Fund?

NAV in Mutual Fund means Net Asset Value. Whenever it comes to mutual funds, a term that comes into use, again and again is NAV.

A mutual fund invests money in many places, so if the money is to be withdrawn from the fund at any point in time, it depends on its NAV. It can be used to know about the money in the fund even if there is no selling. The NAV of a mutual fund is the price at which a unit of that fund can be bought or sold.

What is AMC in Mutual Fund?

In Mutual Fund, AMC means Asset Management Company. This management company is the company that comes to the market with different types of mutual fund schemes.

Like Reliance Growth Fund (Mutual Fund Scheme) was launched by Reliance Capital Asset Management Limited, which is an AMC ie Asset Management Company.

How much money can I invest in Mutual Fund?

It is not necessary that you need a huge amount to start investing in mutual funds. You can start investing even with small savings of just Rs 100.

A monthly SIP investment of just Rs 100 can be done in many mutual fund schemes. If you invest long-term in SIP, then there is a tremendous benefit of compounding in it.

There are many such funds, which have made crores of funds from monthly investment. For example, the SIP performance of ICICI Prudential Value Discovery Fund

In terms of turnover, a monthly SIP investment of Rs 10,000 has grown to a fund of Rs 1.08 crore in 17 years since its launch, and the fund was launched in 2004.

How much do mutual funds charge? (Charges in Mutual Fund)

All the expenses incurred in a mutual fund scheme are called the expense ratio. The expense ratio gives you an idea of ​​the per unit cost of managing a mutual fund.

Generally, the expense ratio is 1.5-2.5 per cent of the weekly net asset average of a mutual fund scheme.

When did mutual funds start in India?

India's first mutual fund came in the form of Unit Trust of India in 1963. In the era of liberalization, the government allowed public sector banks and institutions to introduce mutual funds.

In 1992, SEBI passed a bill under which investors' money in the market should be protected and the security market should be controlled. As far as mutual funds are concerned, SEBI notified regulations regarding mutual funds in 1993.

Since then, private sector companies have been allowed to enter mutual funds. SEBI makes rules from time to time to protect the money of investors and issues various guidelines.

How to choose Mutual Fund?

To choose Mutual Fund, you have to do some research. There are thousands of mutual fund schemes of dozens of companies in the market, but how will you know which one will be good and beneficial for you? So let us tell you how to choose a good Mutual Fund.

1- For how long to invest in Mutual Funds.

First of all, you have to decide for what purpose you want to invest, then how much you can invest and for how long you can stay in it. If you have to invest for two years, then there will be separate mutual funds for that.

If you want to invest for five, seven or ten years or more, there will be other mutual funds for that. If you are investing for the short term, you can choose debt funds or liquid funds. If you are investing for the long term, then equity mutual funds would be the right choice.

2- Decide how much risk you can take.

First of all, you should decide how much risk you can take for this investment. For higher returns, you have to take more risk. But not only the return on investment, but e should also be the protection of your capital i.e. capital.

For example, if you want to invest in equity mutual funds, then you cannot take the risk that the value of your investment may decline. You have to choose such funds which have a balance between return and risk, only then proceed.

3- Before taking the fund, see its performance The fund doesn't need to give returns like the one given earlier. There is no guarantee that if a fund has performed well so far, it will continue to perform well in the future. But from the past performance of different funds, you can get an idea of ​​which one is consistent.

The ups and downs in its performance are not very different from the market and the economy. This will help you choose your preferred scheme and mutual fund. You can also check the ratings given by different rating agencies to these funds.

4- Avoid due expenses.

Whenever you choose a mutual fund, at that time, definitely see what are the expenses associated with investing in it. The expenses you need to look at are our entry and exit load, asset management charges, and expense ratio.

Be sure to also check the asset management charges and expense ratio as all these expenses reduce your profit. An expense ratio of up to 1.5 per cent is considered reasonable for a mutual fund, but avoid investing in funds with an expense ratio higher than that.

Is Mutual Fund Right?

Risk is everywhere, but let us tell you that the regulation of mutual funds is done by the Securities and Exchange Board of India (SEBI). In such a situation, mutual fund companies have to follow the guidelines made by SEBI.

This ensures that investors are not misguided and misguided unfairly. In such a situation, this guideline works in favour of both the investor and the mutual fund companies.

For more information about Mutual Funds, one can visit the website of the Association of Mutual Funds in India (AMFI) at amfiindia.com.

Conclusion-

So friends, in this way now you must have understood what a mutual fund is, and at the same time, you must have got to know many more things about mutual funds today.

Today, along with what is Mutual Fund, you also know that you can invest in Mutual Fund, as well as what should be kept in mind while investing in Mutual Funds and then invest.

If you liked this article, then definitely share it with your friends, and also inform them about Mutual Funds. If you have any questions or suggestions then you can give them in below comment box.