Hello friends, today we will talk and learn more about What are Mutual Fund and its types. What are Mutual Funds? Should I invest in it or not? If I invest in Mutual Fund, will my money be safe or not? If you invest money in a mutual fund, how much profits will there be? And how many types of mutual funds are there? After reading this article there will be no question in your mind.
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Go through the complete post to know in detail: What are Mutual Fund and its types?
Most people consider Mutual Funds to be complicated, hence the fear of investing in it. So today, I thought why not remove the wrong perception that is sitting on the minds about Mutual Funds and make you aware of its truth.
Many consider mutual funds and the stock market to be the same, but this is not the case.
Different between Mutual Funds and Share market
Share market: This is a market where you buy and sell shares of that company by analyzing the company itself. This is a platform where some people earn a lot of money. So some people lose all their money. If you buy shares of a company, then you become a shareholder of that company.
Mutual Funds: As the name of Mutual Funds shows, what happens? It is a collective investment made by various experts. It is a fund in which a lot of investors’ money is put together mutually. This group of funds is managed to earn the highest possible profits.
What are Mutual Funds?
Mutual fund investment is a way in which if you invest money with a little sense, then you can expect good earning. You do not have to have thousands of rupees to invest in it. You can also invest in it at the rate of only 500 rupees every month. You can also save your annual tax savings.
There are many ways we can know mutual funds. Such as company shares, Government bonds, while taking loans, Commodity, etc.
An ordinary person is completely ignorant of the stock market and he does not know exactly when the company shares are decreasing or increasing. And which company is trustworthy in which the money invested is safe and gives profit. In such a situation, mutual funds do solve this problem.
Just as the company issues its shares in the stock market, in the same way mutual funds issue their units. And if we are an investment in a mutual fund, then we have to buy Units.
The funds invested by thousands of people in mutual funds, fund managers of mutual funds, with their expert knowledge, invest in various fields. And whatever profit comes from that area is given percentage wise.
How to do Mutual Funds work?
In India, most companies invest in Mutual Funds, called Special Mutual Funds Companies.
These companies invest in Shares, Bonds, IPOs and Debentures etc. available in the Investment Market by the investors.
Those who take care of these funds are called fund managers and they understand very well the ups and downs of the investment market as experts. Funds managers invest the available funds in a planned manner according to the mood of the market with the aim of earning maximum income.
Mutual Funds Company, Mutual Funds are solely responsible for the units of investment made under the Fund. Apart from this, these companies also provide you services which make the process of your investment more simple and smooth.
These services include financial advice and advisors, accounting, sales, marketing, and customer services, etc.
Types of Mutual Funds
To invest in Mutual Funds, it is very important to know the basics of it. Among these, the most important thing is to know what are the types of Mutual Funds. Mutual Funds Fund can be divided into the following three parts from the point of view of fund payment.
1. Open end mutual fund
In this scheme, investors are allowed to sell or buy funds at any time. There is no fixed date or period for buying or selling funds.
These funds provide liquidity to the investors and hence are well liked by the investors.
2. Close end Mutual Funds
This type of plan has a fixed maturity period and investor funds can buy only during the fund period. And such fund shares are also included in the market. After this they are also used for trading.
3. Interval Funds
This type of Mutual Funds consists of both open ended funds and close ended funds. In this, the facilities of both the funds are predominant.
It allows investors to trade funds at pre-determined intervals. And the funds can be traded on that fixed period.
This is based on the type of Mutual Funds based on the structure, now we will talk about how many Mutual Funds are taken on the basis of asset.
4. Mutual Fund Investment Scheme
Mutual Funds can be divided into the following five parts from the investment point of view. Different mutual funds generate similar Schemes
i) Debt Mutual funds
This scheme is best for those investors who want to earn maximum investment income without taking risk.
Funds collected under this scheme are invested in corporate debt scheme and government loan scheme.
The money invested in this Mutual Funds Fund is almost guaranteed and the risks are very low.
ii) Liquid Mutual Funds
These funds are best for investors who want to earn investment income safely in the shortest possible time.
Investment managers under this scheme invest funds in schemes like Certificate of Deposit, Treasury and Commercial Paper, etc., for a period of 91 days or less.
Due to easy investment redemption, this scheme is the best investment tool for corporate and private investors.
iii) Equity funds
Investors who are interested in long-term capital gain or growth and are fully aware of the profit and loss of risk in the market, they want to invest in this type of fund scheme.
In this scheme, the entire funds of the fund are invested in the equity share of the market. In this scheme both benefits and risks are maximized.
iv) Money Market Funds
This fund is considered to be the most initiated as the money collected in this fund is invested in government schemes. Investors’ funds are considered completely safe in these schemes due to the support of the government machinery.
v) Balanced Mutual Funds
Equity and Debt funds have a mixed benefit in the balance fund scheme.
Funds collected in this type of fund are invested in both equity and debt only. In this scheme, the fund managers invest in the equity market keeping in mind the fluctuations of the investment market, so that investors can be given a chance to earn maximum income.
These types of funds give investors stability on the one hand and on the other hand they also get the benefit of capital gains.
Benefits of Mutual Funds
Earning risk-free income is the first and main objective for any investor. In such a situation, why should someone invest in Mutual Funds Fund, he should know about the following benefits
Professional Management experts
The biggest advantage of investing in Mutual Funds Fund is that it is looked after by experts or experts.
These experts keep a close watch on the investment market and take investment decisions keeping in mind the sharp ups and downs coming in the market. In the common language, these experts are called Portfolio Managers.
Diversity
Investing in Mutual Funds Fund provides an opportunity and advantage to invest in various types of investment tools.
Investors get the benefit of investing in different schemes, shares, bonds and securities deposits in different sectors.
Thus by investing in Mutual Funds Fund, you get the benefit of diversity very well. Your portfolio manager invests your funds in various industries and Assets as you wish.
Variety
There is something for every kind of person in Mutual Funds today. There are all kinds of funds for those who want more returns, from maximum secured funds for those who want high returns, maximum safe investment.
You desire any kind of investment, but it is possible that some mutual fund must be created for you and it will sit according to your requirement.
Convenience
You can easily invest in Mutual Funds. You can also withdraw money from funds as easily. To invest, you have to fill a form, which you can fill from both online or offline or anywhere.
After this, you can sell or buy funds both online or offline. Mutual Funds have a lot of options as well as much more facilities.
Affordable
If you invest in a personal form, you are paid a lot of money in the form of transaction costs. This becomes the cost of your investment. Whereas in Mutual Funds this cost minimizes and maximizes your profit.
Tax Benefits
Whenever you invest in the stock market, you have to pay tax to buy or sell shares. But in Mutual Funds you get tax exemption.
In some funds, you do not have to pay any tax on your profits for some period. Tax exemption is also a reason why they are becoming very popular.
Before investing in Mutual Funds, collect all the documents and all the information related to the funds. You will be responsible for any damage.
Risk of Mutual Funds
- It is very important for you to keep some things in mind before investing in Mutual Funds.
- As you are aware, Investment in Mutual Funds is invested in various Shares, Fixed Deposits, and Securities etc. available in the market.
- In which Asset to invest, the decision is made based on the purpose of your Investment and Mutual Fund Scheme.
- Investment market depends entirely on external factors such as government policies, consumer interest and trends in products and services.
- Today if the price of a share is high, then tomorrow it may be less for some reason. Therefore investing in Mutual Funds may face the following risks.
Due to diversification of investment under Mutual Funds scheme, risk and benefit are two sides of the same coin. Because mutual funds invest in different types of securities, there is a risk of loss.
By investing in Mutual Fund, you do not have control over what type of Share, Debenture or Securities etc. your money will invest in, as it is decided by the Fund Managers of Mutual Fund.