It is said that only two things in life are unavoidable – death and taxes! Both may be unpleasant, but can be comfortable if you learn to plan well.
There are many things you need to learn in life, but none can be as important as investing. No one can work forever or live off their savings forever. This is why it’s important to know what to invest in and how to profit from it.
Availability of multiple schemes can be a bit confusing, and that is why we are writing to highlight the best bets out there.
Mutual funds is a set of money pooled in by investors who could be individual investors, companies or other organizations. This fund is managed by an Asset Management Company (AMC), who go on to invest the same in stocks, bonds and other investment vehicles.
The Net Asset Value (NAV) is the price of individual mutual fund unit, and an AMC can buy or redeem these units.
Benefits of mutual funds
- Diversification: One of the golden rules of investing is to diversify. This reduces the risk that comes with investing. When you invest in mutual funds, your funds are invested in a variety of industries. So, even if one of the industry experiences a downfall, the other industries will still keep your fund flying high.
- Simple to understand: The world of financial products is quite complex, diverse and most of them are difficult to understand. On the other hand, mutual funds demand no prior experience or knowledge in financial markets. Simple industry knowledge is enough to invest in them.
- Investment expertise: Investing in stocks is not easy. You need to be really experienced to do well in the market. Mutual funds are managed by experts with decades of experience of picking the right stocks at the right time.
- Variety: Mutual funds offer investors a variety of schemes which suit their risk appetite. Equity funds are schemes for investors with a high risk appetite. Debt funds are suitable for investors with a medium risk appetite. Balanced or hybrid funds are best for people with a low risk appetite.
- Affordability: Mutual funds schemes are usually a cheaper option for diversifying your portfolio. In cases where investors opt for SIPs (Systematic Investment Program), they end up investing a very small amount every month. This makes the mutual funds scheme attractive and affordable for any person.
Types of Mutual funds
There are many of mutual funds available in the market. We’ll mention a few that will help you get familiar with the schemes available.
- Equity funds: The money that you invest in equity funds are used to buy shares/ stocks of companies. The returns are determined by how these shares perform in the market. The chances of quick growth are high.
- Debt Funds: These are funds that are invested in bonds, securities, etc. These are suitable for people who are looking for a long term investment plans which gives regular returns.
- Balanced or hybrid funds: These are funds that invest in both, equity and debt funds. Basically, its a mixture of the first two funds. It’s the AMC which decides the ratios of the funds allocated to each one.
- Open ended funds: These funds don’t have any limitations on the period of time or the number of units. You can enter and exit whenever you like at the current/ existing NAV.
- Close ended funds: The name suggests what you can expect from a close ended funds. These funds have a predetermined sum that needs to be invested and at times, a lock in period is also put in place.
Be wise with your money and invest in only those assets that match your risk taking appetite. With mutual funds the options are many and that makes it easier for you to choose a specific plan as per your needs.
Putting your money to work sounds easy, but it’s not. BSE Institute Limited gives you the opportunity to do just that with a Basic Program on Mutual Funds Fact Sheet. Understand Mutual Funds to be a master investor and let your money do the talking.