What are Mutual Funds?
Mutual funds are one of the most preferred investment options these days. A mutual fund collects and invests funds from thousands of individuals who have a common investment objective. They are managed by Asset Management Companies that provide various mutual fund schemes to the public. Each mutual fund can invest money in stocks, bonds, Government securities and various other listed and unlisted assets.
Mutual funds are a fantastic investment option for individuals as they can invest in different kinds of asset options without the effort to do the research. The returns generated from mutual funds are distributed proportionately to all the investors. Most AMCs have schemes designed to provide optimum returns to their investors.
How do Mutual Funds work?
When investing in mutual funds, you get a ‘unit’ based on that fund’s Net Asset Value (NAV). NAV is the price at which you can buy or sell your units.
Your AMC fund manager invests the collected money into a variety of instruments like equity shares, bonds, Government securities, and derivatives. The money thus managed and invested is called assets under management, and the returns from the investments, dividends or interest are also added to the assets under management. The value of your units depends on the appreciation of the assets under management of your mutual fund.
You can redeem your units any time they wish, when you need the funds or when you feel the NAV of the fund is at its highest. There may be charges on redemption that vary from fund to fund and are announced from time to time.
What are the types of Mutual Funds?
In India, mutual funds are classified into three, namely Equity Mutual Funds, Debt Mutual Funds and Hybrid Mutual Funds. Each type has its own features, and the risk and returns vary.
Equity Mutual Fund
Debt Mutual Fund
Hybrid Mutual Fund
Why should you invest in Mutual Funds?
How to Select the Best Mutual Fund?
Before investing in Mutual Funds, you must have a clear and compelling idea of your financial goals for the future. There are a few other factors that you should keep in mind before choosing a plan.
You should always invest in any sector with an eye towards the future. Whether you are looking for a short-term profit or long-term benefit like a retirement corpus, you must be clear about your financial goals. Investing without a plan can lead to massive financial mismanagement. If you are a risk-averse individual, it's better to go for less risky funds but provide decent liquidity.
Once you select the best mutual fund category, you should opt for the top-performing mutual fund in that category. Analyzing the returns over some time is the best way to know if that mutual fund would be beneficial to you or not. If the fund has shown better returns over five years, it could be the right choice.
Choosing the best mutual fund also depends on your risk appetite. If you have a high-risk appetite, you can choose equity funds that may provide you with higher returns. On the other hand, if you are a conservative investor who is wary of taking risks, it's better to opt for a debt fund or a large-cap equity fund.
The higher the value of total assets in a fund, the chances for the returns are better. A large AUM (Assets under Management) also indicates investors' trust in that fund and its performance.
Mutual Fund Investment Modes
If you want to invest in mutual funds, you have two modes of investments – lump sum and Systematic Investment Plans (SIP)
Lump Sum Investment : As the name indicates, it involves a one-time investment. If you have a sizable disposable income in hand, you can go in for lump sum investment.
Systematic Investment Plans (SIP) : Systematic Investment Plan or SIP allows you to invest money at periodic intervals. Investors can facilitate transfer to their SIP through the auto-debit feature from their savings account.
How to buy Mutual Fund online at Fincover?
Investing in mutual funds has never been so easy. We have handpicked the best mutual funds that meet your needs and expectations. We have collated the best performing mutual funds in our platform. You can easily invest in mutual funds by following these simple steps:
- Log in to Fincover.com
- Click on “Banking Products” and select “Mutual Funds”
- Complete your KYC process
- Search and choose the most suitable fund among the handpicked plans
- Fill in all the mandatory details
- Choose the preferred mode of investment (SIP or lump sum)
- Select the tenure and size of your SIP
- Link your bank account
- Complete the purchase on our payment page
- Check your email and take a printout copy of the acknowledgement