What are mutual funds, and how do I invest in them?
Investing in mutual funds is a great way to put your money to work and accumulate wealth over time. When you invest in a mutual fund, you pool your money with other investors and gain access to a professionally managed portfolio of stocks, bonds, and other securities. Mutual funds are an excellent option for long-term investing, as they offer tax benefits, diversification, and professional management.
What are mutual funds?
Mutual Funds are professionally managed investment portfolios that pool money from different investors to invest in different asset classes, like equities, debt funds, and hybrid funds. Mutual funds are a great way to put your money to work, as they offer exposure to a diversified portfolio of assets that are managed by professional fund managers. When you invest in a mutual fund, you purchase units, and the value of each unit is based on the net asset value (NAV) of the underlying holdings.
Different types of mutual funds available in India:
1. Equity Funds
Equity funds are those which invest in stocks issued by companies. These funds aim for long-term capital growth and have a higher risk profile but offer high returns. They further classify as:
– Large-cap funds -They invest in large companies with a long record of stable earnings and strong brands.
– Mid-cap funds -They invest in medium-sized companies, allowing investors to participate in growth from earlier on.
– Small-cap funds -These investments offer the highest potential for long-term growth but have high risk since they invest in a new business or unestablished companies.
2. Debt Funds
A debt fund is a type of fund that invests in fixed-interest-generating securities like bonds, debentures, or government securities. Debt funds are considered more conservative investments than equity funds, emphasizing the preservation of your capital and the generation of predictable returns.
Types of debt funds include:
– Liquid funds -These funds invest in securities that have a maturity of no more than 91 days, making them a safe and stable investment option.
– Short-term debt funds -These funds invest in securities with a maturity period of one to five years.
– Dynamic bond funds -These investments do not have constraints on the maturity of the debt securities.
3. Hybrid Funds
Hybrid funds, also known as balanced funds, are mutual funds that invest in both equity and debt instruments, to achieve long-term capital appreciation while minimizing risk. Hybrid funds are further classified as:
– Conservative hybrid funds -These invest in equity securities, debt securities, and money market securities, with at least 75% in debt securities.
– Aggressive hybrid funds – They invest in equity securities, debt securities, and money market securities, with at least 65% in equity securities.
– Equity-oriented hybrid funds -Invested in equity securities, debt securities, and money market securities, with at least 65% in equity securities.
4. Index Funds
Index funds are those that track a particular market index with the same proportion. These funds invest in the same stocks as those of a particular market index, aiming to achieve the same returns. They have lower expense ratios as compared to actively managed funds.
5. Sectoral Funds
Sectoral funds invest only in specific sectors such as banking, pharmaceuticals, and technology. These funds aim to capitalise on opportunities and fluctuations in the chosen sector, which offers an opportunity to focus investments in a related group of businesses.
III. How to Invest in Mutual Funds Online:
With the advent of digital technologies, investing in mutual funds online has never been easier. Here is a step-by-step guide to investing in mutual funds online:
- a) Choose your investment style – Before investing in mutual funds, it’s essential to determine your investment style. Different mutual funds cater to different investment objectives, and it’s crucial to choose a fund that aligns with your investment goals.
- b) Complete your KYC – The next step is to complete your KYC (Know Your Customer) process. KYC is a mandatory requirement for all mutual fund investors, and it involves submitting your identity and address proof.
- c) Select a fund – Once you have completed your KYC, you can start exploring different mutual fund schemes and select a fund that aligns with your investment goals.
- d) Invest – After selecting a fund, you can invest in Mutual Funds Online using any of the digital platforms or mobile apps. The online process of investing in mutual funds is easy and hassle-free.
- e) Apps available in the market for investment in mutual funds:
In recent years, several digital platforms and mobile apps have emerged that make investing in mutual funds online easier. Here are some popular apps available in the market for investment in mutual funds:
- a) Bajaj Finserv App – This app offers a user-friendly interface to help investors research, analyze, and invest in mutual funds.
- b) Moneycontrol App – The Moneycontrol App offers investors access to a wide range of mutual funds and market updates.
- c) myCAMS App – myCAMS App allows you to invest in mutual funds, access your investments and track your portfolio performance.
- d) MF Utility App – The MF Utility App is an integrated platform that enables investors to transact in mutual funds through a single window.
In conclusion, investing in mutual funds can be a great way to build your wealth over time. With the availability of several digital platforms and mobile apps, investing in mutual funds online has never been easier. However, before investing, it’s crucial to consider your investment goals, risk tolerance, and the pros and cons of mutual funds. With online apps, you can invest in mutual funds online with ease and convenience. So, why wait? Download the app today and start investing in mutual funds!
