Have you ever heard about What are Mutual Funds? Do you know how this works? If not, I will tell you about it today.
Just on hearing about them, many people make many imaginations in their mind and, without knowing anything, think about it in the opposite direction, which is not suitable to do at all.
So today, I thought, why not remove the grief that is sitting on the minds of your people about Mutual Funds and make you aware of its truth.
A mutual fund is a perfect and easy way to earn money. 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.
Many people consider Mutual Funds and the stock/share market the same, but this is not the case. Mutual fund and share market share the market, but there is a lot of difference between the two.
From this post today, we will know the difference between them and, after all, what is this mutual fund and how can we safely invest in it?
What is Mutual Fund – What is Mutual Fund
A mutual fund is a fund (collection) in which many investors’ money is put together mutually. This group of funds is the most. I managed to make possible profits.
Simply put, Mutual Funds are a fund made up of a lot of money. The money invested is used to support in different places, and it is tried that the investor should be given maximum profit from his money.
Fund, the task of managing, is done by a professional person, which experienced fund managers ( Professional Fund Manager is called).
The job of a professional fund manager is to look after the mutual fund and make more profit by putting the money of the fund in the right place. If put in simple words, its job is to convert the funds invested by the people into profits.
Mutual Funds are registered under SEBI (Securities and Exchange Board of India), which controls the market in India. SEBI does the job of securing investors’ money in the market. SEBI ensures that some company is not cheating people.
Mutual funds have been present in India for a very long time, but people do not know much about them even today. In early times people believed that Mutual Funds were meant only for the rich.
But this is not the case at all, and this perception seems to be changing in today’s time. The trend of people has increased towards Mutual Funds. In today’s time, Mutual Funds is not just for the rich.
Instead, any person can invest in Mutual Funds at the rate of 500 ₹ per month only. The minimum amount of investment in Mutual Funds is 500 rupees.
History of mutual fund
The mutual fund industry in India started in 1963 with the formation of the Unit Trust of India (UTI) on India at the Reserve Bank of India (RBI) and the Government of India.
Its main objective was to attract small investors and make them aware of the topics related to investment and the market.
The UTI was formed in 1963 under an Act of Parliament. The Reserve Bank of India established it. And initially, it worked under RBI.
In 1978, the UTI was separated from the RBI. The Industrial Development Bank of India (IDBI) got the authority for regulatory and administrative control in RBI. And UTI started working under it.
The development of Mutual Funds in India can be divided into several stages. For example, the first phase was from 1964 to 1987, in which UTI had a fund of ₹ 6700Cr.
After this, the second phase starts from 1987, in this public Entry of sector fund started. During this time, many banks got the opportunity to create Mutual Funds.
SBI created the first NONUTI mutual fund. The second phase ended in 1993, but by the end of the second phase, AUM, i.e. Assets under management, increased to ₹ 47004CR, more than ₹ 6700Cr. In this phase, there was a lot of enthusiasm in the mutual fund among the investors.
The third phase started in 1993 which lasted till 2003. In this phase, private sector funds got approval. In this stage, investors got more options of Mutual Funds. This phase ended in 2003.
The fourth phase started in 2003, which is still going on. In 2003, UTI was divided into two separate stages. The first SUUTI and the second UTI mutual fund used to work as per the rules of SEBI MF. Read the impact of the 2009 economic recession on the whole world.
There was a lot of loss of investors in India too. Due to this, the trust of the people decreased slightly from mutual funds. But gradually, this industry started coming back on track. In 2016, AUM was ₹ 15.63 trillion, which was the highest ever.
The number of investors has already crossed 5 CR, and millions of new investors are being added every month. This phase has proved to be golden for mutual funds.
Types of Mutual Funds
There are many types of mutual funds. We can divide them into two categories. The first type of mutual funds is based on structure, and the second type of mutual funds is based on asset.
A) Types of Mutual Funds depending on the structure
1. Open-ended mutual fund
Open-ended funds = 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-ended Mutual Funds
This type of plan has a fixed maturity period, and investors can buy funds 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 (Interval Funds)
This type of Mutual Funds consists of both open-ended funds and closed-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 sold 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 based on the asset.
B) Types of Mutual Funds based on Assets
Funds Debt Funds = The risk to the investor in such funds is meagre. Investors invest in debentures, government bonds and other fixed income, which is a safe investment.
Debt funds provide fixed returns. If you want a steady income, then this fund is for you. If the investor’s earnings are more than 10,000 from the funds, then the investor will have to pay tax.
2. Liquid Mutual Funds
Liquid Funds = This is also a safe option to invest in. Liquid funds invest in short-term debt instruments. So if you want to invest for a short time, then liquid funds can be your choice.
3. Equity funds
Equity funds = If you want to get long term profit, then Equity funds are for you. These funds invest in the stock market. Such funds also involve risk, but the profits from them are higher than others.
4. Money Market Funds
Such funds provide reasonable returns to investors in the short term. It is invested in safe places.
5. Balanced Mutual Funds
In such fund schemes, there is a mixed benefit of equity funds and debt funds. Funds deposited in this type of mutual fund are invested both in equity and in debt.
This type of fund gives investors stability in income on the one hand, and on the other hand, it also boosts income growth.
Apart from these funds, there are many types of funds, but these are the main and most used funds.
How to buy a mutual fund
By the way, you will find many such Android apps in the market, using which you can easily invest in Mutual Fund. Some of them are special such as Groww, MyCams, InvesTap, Krack Mobile App, IPRUTouch App etc.
While following my advice, you can use Groww Mutual Fund App. Because I have been using this app for a long time, I have not had any problem.
Groww App (Android): Sign Up Now
this Through the link, you must first sign up in the Groww App if you do not already have an account. At the same time, once you have created an account, then you can easily invest money in Mutual Funds through this app.
Benefits of mutual fund
Although there are many fields of Mutual Funds, today I will try to give you complete information about the essential areas.
1. Professional Management
Mutual Funds experts manage the money you invest in Mutual Funds with their experience and skills.
Before investing this money, they research the fund to collect and collect the information. After that, according to the data collected by them, your cash only increases.
2. Diversification (Diversity)
The basic mantra of safe investment is that instead of putting your money in one place, divide it into many areas and invest in many places. Every mutual fund invests cash in different places.
Good funds can be invested in other companies and other sectors or perhaps companies of different sizes, giving maximum protection.
3. Variety (Options) In
Mutual Funds today there is something for every kind of person. There are all sorts of funds, from maximum safe funds for those seeking full returns and top safe investments.
You wish for any investment, but it is possible that some mutual fund must be created for you, and it will sit according to your requirement.
4. Convenience (convenience)
You can easily invest in Mutual Funds. You can also withdraw money from funds with the same ease. To support, you have to fill a form that you can load 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 a lot of facilities.
5. Affordable (cheaper)
The share price of big companies is very high. You often want to invest in those companies, but you cannot do so because of your low budget. While many people have the money together in Mutual Funds, your money is invested in big companies.
And your money earns more profit there. A mutual fund is a way for big but small investors to invest in large companies through Mutual Funds.
6. 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 prevalent.
Before investing in Mutual Funds, collect all the documents and all the information related to the funds. You will be responsible for any damage.
How was the information about the mutual fund?
Through this post, we have tried to provide you with information about Mutual Funds.
We hope that you will like our post, then share it with your friends now and if there is any problem related to how to buy a mutual fund or want information, please write in the comment box so that we can help you in your time.