Mutual Funds

Invest in Mutual Funds

Mutual Funds

Mutual Funds Investment offers the perfect solution for a group of investors to effectively pool their money, and invest in a wider variety of securities facilitated by expert fund managers. Mutual fund companies essentially collect the money from their investors or shareholders and invest that collective money into best investment schemes and individual investment vehicles based on risk profiles, money management philosophies, and financial goals among their important factors. 

Mutual funds then pass along the profits (and losses) of the mutual funds investment to its shareholders. Mutual funds normally come out with several mutual fund schemes that are launched from time to time with different mutual funds investment objectives.  

Benefits

Professional Money Management

Fund managers are responsible for implementing a consistent strategy that reflects the goals of the best investment plans. Fund managers monitor the financial market and economic trends in order to make informed and effective mutual funds investment decisions and choose the best mutual funds in India. 

Diversification

When you look to invest in mutual funds, diversification is one of the best ways to reduce risk. Mutual Funds offer investors an opportunity to diversify across assets depending on their investment needs and appetite. 

Liquidity

Investors can sell their mutual fund units on any given business day and would receive the current market value on their investments within a short period (normally three-five days).

Affordability

All kinds of people based on their financial goals can invest in mutual funds at highly affordable rates. Some mutual fund schemes have an initial investment as low as Rs 500. 

Convenience

Most private-sector funds provide you with the convenience of periodic purchase plans, automatic withdrawal plans and automatic reinvestment of interest and dividends. Mutual Funds also provide you with detailed reports and statements that make record-keeping simple. When you invest in mutual funds, you can easily monitor the performance of your fund by reviewing the business pages of most newspapers or by using our Mutual funds section.

Flexibility and variety

When you decide to invest in mutual funds, you can pick from conservative, blue-chip stock funds, sectoral funds, sip investment or other best mutual funds that aim to provide income with modest growth or those that take big risks in the pursuit of greater returns. You can even buy balanced funds or those that combine stocks and bonds in the same fund.

Types of Mutual Funds

These are some of the best investment schemes. They allow investors to participate in stock markets. Though categorized as high risk, these mutual fund schemes also have a high return potential in the long run. They are an ideal choice for investors in their prime earning stage, looking for the best sip to invest in. These mutual fund schemes help to build a portfolio that gives investors superior returns over the long term than a sip investment. 

Equity funds can be further divided into three categories:

These are mutual funds that invest in a specific sector. These can be sectors like infrastructure, banking, mining, etc. or specific segments like mid-cap, small-cap or large-cap segments. They are suitable for investors having a high risk appetite and have the potential to give high returns.

Index funds are ideal for investors who want to invest in equity mutual funds but at the same time don't want to depend on the fund manager. An index mutual fund follows the same strategy as the index it is based on.

For example, if an index fund follows the BSE Index as the replicating index and if it has a 20% weightage in let's say Stock A, then the index fund will also invest 20% of its assets in Stock A.

Index funds promise returns in line with the index they mirror. Further, they also limit the loss to the proportional loss of the index they follow, making them suitable for investors with a medium risk appetite.

These funds offer tax benefits to investors. They invest in equities and are also called Equity Linked Saving Schemes (ELSS). These type of schemes have a 3-year lock-in period. The investments in the scheme are eligible for tax deduction u/s 80C of the Income-Tax Act, 1961

These types of mutual funds invest in short-term debt instruments, looking to give a reasonable return to investors over a short period of time. These funds are suitable for investors with a low-risk appetite who are looking at parking their surplus funds for the short term. These are a good alternative to putting money in a sip investment.

These types of mutual funds invest a majority of the money in debt - fixed income i.e fixed coupon-bearing instruments like government securities, bonds, debentures, etc. They have a low-risk return outlook and are ideal for investors with a low-risk appetite looking for the best investment plans to generate a steady income. However, they are subject to credit risk.

As the name suggests, these are mutual fund schemes that divide their investments between equity and debt. The allocation may keep changing based on market risks. They are more suitable for investors who are looking at a combination of moderate returns with comparatively low risk.

These types of mutual funds are similar to balanced funds but the proportion of equity assets is lesser compared to balanced funds. Hence, they are also called marginal equity funds. They are especially suitable for investors who are retired and want a regular income with comparatively low risk.

These types of mutual funds are some of the best mutual funds in India, which invest only in government securities. They are preferred by investors who look for an alternative for the best sip to invest, are risk-averse and want no credit risk associated with their investment. However, they are subject to high-interest rate risk.

Invest and Monitor the performance of your mutual funds through our “MyWealthBridge” portal or app.

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FAQs

1 What is an Asset Management Company?
An Asset Management Company (AMC) is a highly regulated organisation that pools money from investors and invests the same in a portfolio. They charge a small fee for fund management.
2 What is NAV?
NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows: NAV= Market value of the fund's investments + Receivables + Accrued Income – Liabilities - Accrued Expenses The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV) and it varies on daily basis. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20.
3 How often is the NAV declared?
NAV is required to be disclosed by the mutual funds on a regular basis – on all business days or weekly – depending on the type of scheme. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. The NAVs are also available on the websites of mutual funds. All mutual funds are also required to put their NAVs on the website of Association of Mutual Funds in India (AMFI) www.amfiindia.com , so that the investors can access NAVs of all mutual funds at one place.
4 What is Entry Load?
The non-refundable fee paid to the Asset Management Company at the time of purchase of a mutual fund unit is termed as Entry Load. Entry Load is added to the NAV (purchase price) when you are purchasing Mutual Fund units.
5 What is Exit Load?
The non -refundable fee paid to the Asset Management Company at the time of redemption/ transfer of units between schemes of mutual funds is termed as Exit Load. It is deducted from the NAV (selling price) at the time redemption/ transfer.
Purchase price is the price paid by you to purchase a unit of a mutual fund scheme. If the fund levies an entry load, then the purchase price would be equal to the sum of the NAV and the entry load levied.
Redemption price is the price received on selling units of an open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.
Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load.
Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option, the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes to meet their changed investment needs, risk profiles or other changing circumstances during their lifetime.
There is no lock-in period in the case of open-ended funds. However, in the case of tax saving funds, the minimum lock-in period is three years.
The performances of Mutual funds are largely a combination of the stock market’s performance and the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies and other factors governing the economy. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy.
No, there are other types of Mutual Funds that do not invest in equity but in bonds issued by banks, companies, government bodies and money market instruments (bank CDs, T-bills, Commercial Papers,) which have lower risk but also offer lower returns compared to equity funds. These funds are better suited as alternatives to traditional options like bank fixed deposits or PPFs. Hence if you are looking to invest your money in places that can give you better returns than a bank or post office FD, and still be more tax efficient, Debt Mutual Funds could be a great option.
When you park your money in a bank Fixed Deposit (FD), the bank promises to pay fixed interest in return. Here you’ve lent money to the bank, and the bank is a borrower of your money, owes you a fixed periodic interest. Debt Mutual Funds invest in debt securities like Government bonds, Company bonds, Money Market Securities. Bonds are issued by corporates like power companies, banks, home finance companies and the Government. These bond issuers promise to pay their investors (those who buy their bonds), a periodic interest in return for their money invested in the bonds. Bond issuers are like the bank (borrower) in our FD example, borrowing money from investors and promising to pay periodic interest. While you are the investor in a bank FD, Debt Funds are the investors in these bonds. Just like you earn interest from an FD, Debt Funds earn periodic interests from their bond’s portfolio. Unlike assured interest from FDs, periodic interest payments to fixed income Debt Funds from these bonds can be fixed or variable without any guarantee. When they sell bonds from their portfolio, they get the principal back. When you invest in a Fixed Income Mutual Fund, you indirectly invest in its bond portfolio, spreading the risk across different bond issuers. You benefit from such risk diversification.
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