Mutual Funds Investment Guide
Updated on June 11, 2022, 2:34 p.m.
Investment is the major component of any economic growth and nothing is better than the Mutual Funds as investment option. People fear the financial term ‘Mutual Funds’ and many are afraid of managing their finances.
Let me put it in simple words, A mutual fund is a unique financial vehicle where money is gathered after collecting from various investors to invest in securities like Money Markets Instruments, Bonds, Gold and Stocks. They allocate the funds in various security related policies in India and you can start your investments beginning from INR 500, varied across numerous policies.
Benefits of Investing in Mutual Funds
Mutual Funds are gaining more popularity in India because of certain reasons given below as follows:
- Uncertainty In Life
- Rise Of New Market Players
- Good Savings for Retirement
Mutual Funds are gaining repute over the years in India and having amazing benefits like:
- Amazing Variations: Mutual Funds are ideal to differentiate your portfolio across various sectors. As an individual investor, mutual funds offer a powerful medium to invest in securities like International Markets, Debts, Equities, Stocks and Securities. There is a saying that all the money market instruments need not grow at the same pace. If one instrument does not work well, then your investment will always be safe. It increases the investor’s returns and reduces the risk.
- No Lock in Period: This is the best part as mutual funds come with no lock-in periods. A lock-in period means a lot of restriction on investors to sell their shares, and once invested, you cannot withdraw. Mutual funds have entry and exit points, giving freedom to invest.
- Goal Oriented: The mutual funds are good in offering good fund plans, where investors can invest their hard-earned money to meet their financial goals. Schemes are present to suit every person and each one of them is having the Risk Factor, Investment, and Nature of Investments. Hence be careful in choosing a proper investment plan that gives you the comfort zone in adverse situations.
- Expert Guidance and Management: Most of the financial solutions firms and corporations have qualified and certified Mutual Fund Advisors or Relationship Managers handling your portfolios. The experts give you valuable advice, pool in your money and divide this money in various securities there by assisting the investors to have a profit. They have an eagle eye on the market fluctuations and the entry and exit of the Mutual Funds players in Indian Markets.
- SIP (Systematic Investment Plans):A plan offered to investors by mutual funds companies where one can invest a fixed amount in a scheme on a regular basis like once in 3 months, or once in 6 months. An investor can start the plan by making the payment of INR 500 and quite similar to the recurring deposit. It is a non-risk plan and you can give standing instructions to debit the required amount on a regular basis in a month, 3 months or 6 months. It is advisable to have SIP initiated in the early stage of your life, so that the returns on investment will be excellent.
- Cost: The mutual funds are very cheap compared to other forms of investment, whereas the Asset Management Companies and the Fund Corporations will charge small amounts on the investors for managing investments. It ranges from 0.5% to 2% of the total amount. SEBI has directed the companies to make it below 2%.
- Easy and Flexible: Mutual Funds is the vibrant word in the financial field, as they offer flexibility to the investors, where investment options are available. An excellent combination of investing using SIP/no lock-in period makes mutual funds a lucrative option.
- Diversification of Risks: Purchasing the shares in the Mutual Funds is the best way to enhance the investments in various assets and securities like debt, gold and equities. Due to diversification the risk with one kind will be effectively controlled by others. To put it in simple words, if you are not getting returns in one segment, then other investments will not get affected and will give you amazing returns.
- Provides the Comfort Zone: If you are an investor, then it will be next to impossible to purchase all the securities held by a single mutual funds in India. You can invest a small amount in various mutual funds and get the relevant returns.
- Well Organised: In India the Mutual Funds are controlled and organised by the Capital Markets Regulator like the Securities and Exchange Board of India (SEBI), under the SEBI rules of 1996. The SEBI has introduced various rules, keeping in mind the concerns regarding the Investor Protection, Risk and Risk Mitigation and effective valuation and analytical procedures in India.
- Tax Benefits: In India, if you observe the functioning of the mutual funds, it is found that investment up till INR 1,50,000 always qualifies for various tax benefits under the section 80C of the Income Tax Act of 1961.
Types of Mutual Funds in India
There are four different types of Mutual Funds in India.
- Equity Funds: It is a Mutual Fund Scheme that deals with the investment in the shares and the stocks of the companies in India.
- Fixed Income Funds: A unique investment mechanism that is dealing with the investment in Corporate and Government bonds. These offer preservation of the money and income and gives less risk.
- Money Market Funds: A unique Mutual funds are investment of lower risk in nature and deals with money market instruments to give good returns over one year. It is risk free in nature and an instant hit with the customers in India.
- Hybrid Funds: As the name suggests the Hybrid funds are the combination of Debt and the Equity Investments designed to fulfil the expectations. It is preferred by the low-risk investors in India thereby safeguarding them against the extreme instability in the finance markets.
List of Top Mutual Funds Companies in India
- IDFC Funds
- Aditya Birla
- SBI Small Cap
- ICICI Prudential
- SBI Liquid Fund
- DSP Equity Fund
- L and T Cash Fund
- Axis Multicap Fund
- Essel Midcap Fund
- Baroda Income Fund
- IDBI Small Caps Fund
- Kotak Blue Chip Fund
- India bulls Liquid Fund
- Reliance Large Cap Fund
- HSBC Equity Hybrid Fund
- HDFC Infrastructure Fund
- Sundaram Small Cap Fund
- LIC MF Children’s Gift Fund
- Edelweiss Tax Advantage Fund
- ICICI Prudential Blue-chip Fund
- Aditya Birla Sun Life Equity Fund
- Canara Robeco Blue Chip Equity Fund
- DHFL Pramerica Ultra Short-Term Funds
- Franklin India Banking and PSU Debt Funds
Mutual funds are ideal for creating long time wealth and it offers great option for the people. Every investor is having different financial capacity, ability to take risk and some of them will run away from taking risk. No investment plan in India offers flexibility like the mutual funds and provides a bright future for the investors in India. Furthermore, you must always respect the statutory warning below given below the Mutual Fund Policy Document stating that “Mutual Funds are always subject to market risks and Read all the scheme related documents carefully.”
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