Mutual Funds
Mutual funds give opportunities to invest in different companies where people mutually contribute small amounts. This collected amount is then effectively invested based on the research and expert analysis of the fund manager who effectively manages these funds. The Fund Manager takes decisions on behalf of the investors keeping in view the aspects of basic theme and purpose of the scheme. Every Scheme has its NAV (Net Asset Value) based on its units allocated to each investor based on the amount invested by each investor. Investment process is very smooth and available in both ways online as well as offline. You need to open a demat account to invest online in mutual funds.
Mutual Fund investment can be broadly classified in three types
This mutual funds invest in stock market in different types of funds
- Large Cap Funds
- Mid Cap Funds
- Small Cap Funds
- Sector/Thematic Funds
- Auto
- Pharma Funds
These funds comparatively carry a lesser amount of risk.
There are two ways to investment in mutual funds
- Amount can be invested monthly which can be as less as Rs 500 per scheme
- Investor does not require to time the market
- Cost is averaged out as investment is regular
- It creates a saving habits
Lumpsum investment is known as one time investment where certain investors based on their profession might prefer investing once rather than going with a monthly option.
- Timing the market plays important role in lumpsum investment
- Returns can be higher
- Systematically investing then reinvesting the funds in lumpsum taking market opportunity is also one method to invest lumpsum
Tax Saving Purpose Schemes (ELSS)
People who want to make investments with the goal of tax saving there are specific schemes for the same which are known as ELSS (Equity linked TaxSaving Schemes). This scheme has a lock-in period of 3 years.
Advantages of Investment in Mutual Funds
- Investment process in smooth and paperless
- Long Term Investment will give good returns
- Tracking Funds and Redemption process is easy
- Liquidity is high
- Partial Withdrawal option is available
- Regulated by SEBI
- Wide variety of options available for selection
- Taxation is simplified in mutual funds
- Expense Ratio in the funds ranges from 1 to 3 percent
- Child Education Plan
- Pension Plan
- Term Insurance
- ULIPS
- Senior Citizen Plan
- Single Investment Plan
- Health Insurance
- Corporate Insurance
- Mutual Funds