Mutual Fund

What is Mutual Fund?

A Mutual Fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds, and other securities.

Investing In Mutual Funds:

Mutual Funds are the only instrument in India whose returns beat the inflation rate. As more and more Indians get financially literate and understand the benefits of investing in mutual funds, the penetration of mutual funds in Indian households is increasing. Mutual funds are instruments that create long-term wealth. The long-term returns of a mutual fund scheme beat the returns generated by any other asset class by a long margin.

Investing in mutual funds offers you the following benefits:

Types Of Mutual Funds:

Equity

Oriented

Funds

Equity Oriented Funds invest in equities. The main objective of equity funds is to seek long-term capital appreciation. Equity funds may focus on certain sectors of the market or may have a specific investment style based on the objective of the underlying scheme.

Debt

Funds

A debt fund primarily invests in bonds and other debt instruments. Debt funds invest in short and long-term securities issued by the Government, Financial Institutions, Debentures, etc. Debt funds are ideal for income generation and capital preservation.

Hybrid

Funds

Hybrid funds are a mix of equities and debt securities. They seek a balance between growth and income by investing both in debt and equity. In hybrid funds, equities provide long-term capital appreciation while the regular income from debt instruments provides stable returns.

Solution

Oriented

Funds

Solution Oriented Funds are customizable as per the future financial requirement of an investor. These funds are long-term income funds. This fund helps in building a corpus that further ensures adequate capital for a specific objective.

 

Other

Schemes

This category invests in all the companies that make up the particular index, which gives an investor a more diverse portfolio than buying individual stocks. Index funds follow a benchmark of an index like Sensex, and Nifty 50,  to invest in them as per the allocation similar to these benchmarks.

How To Invest In Mutual Funds:

Lumpsum

Investment

A lump sum investment is when an individual invests a large sum of money in a mutual funds scheme in one go. Generally, these types of investments are done by people who are veteran investors. A lump sum investment is the most preferred method of investment by individuals at the time of stock market corrections.

Systematic

Investment

Plan (SIP)

A SIP or Systematic Investment Plan is a system wherein you can invest a fixed amount at regular intervals in a mutual fund scheme of your choice. Generally in a SIP the investment amount, period of investment, and tenure of investment are predecided. SIP also offers the following benefits

Systematic

Transfer

Plan (STP)

A STP or Systematic Transfer Plan is a method through which fund gets transferred from one fund to another. Generally, in an STP the fund transfer takes place from a debt fund to an equity fund. STP enables quick deployment of funds into an equity scheme during market fluctuations.

Systematic

Withdrawal

Plan (SWP)

A SWP or Systematic Withdrawal Plan is a method through which you can pull out a certain fixed sum of money from a mutual fund scheme every month/quarter/year. A SWP works as a fixed source of income for the investor in his post-retirement life.