What Is Mutual Fund?

Before investing money in mutual funds

Most of the people in India keep their money in a savings bank account, people consider Fixed deposit, Gold as the only means to invest. But mutual fund is one of the many investment tools. Most of the people keep their money in savings bank account due to lack of knowledge.

Savings account will not give you more than 4% return after 1 year but India’s costly rate average is 5% every year. That is, the value of the money you keep in the savings account keeps on decreasing every year. Keeping money in savings account is a foolish act. So it is very important to invest your money in the right place. Where you can earn good returns from your money above the costly rate.

What Is Mutual Fund?

When many investors invest money for the same purpose, then that money is called mutual fund. Now this mutual fund has an objective which is to earn money from equity and debt market. In mutual fund, you give money to a company which is called AMC (Assets Management Company). An AMC appoints the Mutual Fund Manager, who is an educated and knowledgeable person. Those who try to earn profits by investing the money of investors in the market on behalf of all the investors.

Mutual fund managers invest in different companies in the stock market, and keep some percentage of the return that comes with them as commission. Because mutual fund company is doing your work. The mutual fund company tries to make maximum profit from your money, because the more investors will invest in their AMC, the more it will give profit to the investors.

Types of Mutual Funds:-

Before investing money in mutual funds, investors should know which type of fund is good for them. Let us know how many types of mutual funds are there.

1. Equity Fund:-

Many mutual fund companies invest the money of investors in the stock market. Where the risk is also high with the return, the fund that invests in the stock market is called Equity Mutual Fund. There are 3 types of Equity Funds-

  • Large Cap Equity Fund: – In this fund invest in big company. Where the returns are slightly less, but the risk is also less. Mutual Funds
  • Mid Cap Equity Fund: – In this fund, middle class invests in the company. Where return is available slightly more than large cap funds and the risk also increases slightly.
  • Small Cap Equity Fund: – The company investing in this fund is very small, there is a fund for those who can take more risk. Small cap funds offer good returns along with high risk.

2. Debt Fund: – In this fund, investors’ money is invested in government bonds, money market, commercial paper, bank certificates etc. In this, the risk in front of equity is low and the returns are also low.

3. Hybrid Fund: – The money of this fund is invested in both equity fund and debt fund. Here both risk and return are balanced.

Which A3 type of mutual fund told you, which fund to invest in, you have to decide according to your financial condition.

Continue Reading: Everything you need to know about highest returning stock

How to invest in Mutual Funds:-

Well, there are many mediums to invest in Mutual Funds, Grow, Paytm Money etc. For investing in mutual funds, you will need Aadhar Card and Pan Card, with this you can easily invest in mutual funds by opening your account online as well.

Read More: Mutual funds all you need to know

Questions related to mutual funds-

.1. Are Mutual Funds Right?

Answer: – Yes, mutual funds are correct. Better mutual fund than keeping it in the bank. A good mutual fund will earn you very good returns.

2. How much money can I invest in mutual funds?

Answer: – You can start investing in mutual funds with just Rs.500.

3. How much return do Mutual Funds give?

Answer: – In the long run, Mutual Funds can expect returns of 12% or more.

4. Do SIP or Lamsam in Mutual Fund?

Answer: – Investing money in one go is not a good thing. Therefore, new people should invest through SIP.

5. When is the right time to invest in Mutual Funds?

Answer: – Mutual funds are linked to the stock market, when the market goes down then it is the right time to invest.

If you have any suggestion or query related to share market and mutual fund then you can ask us in comment. To know more about the share market or mutual fund, you can read our other posts:-

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