Today I will talk about something that will not only keep your money safe but will also help it grow. Yes, I am talking about mutual funds. Do you know that in our country, more than 26 thousand crores of rupees are invested in mutual funds every month? So now the question is why so many people trust mutual funds. There is only one reason for this. There are some amazing benefits behind it that you will be surprised to know.
Mutual Funds for Beginners
Mutual funds are not just a means of investing money. They can be a great companion on the path to fulfilling your dreams. If you invest wisely, this companion will one day help you fulfill your big goals. Many new investors do not know what a mutual fund actually is? How does it work? What are its benefits? Is there any risk and where to start? Today I will explain everything about mutual funds to you in a very simple way. If you are a new investor or have any fears or doubts about mutual funds, then this is for you. After watching it completely, you will clearly understand how to start investing in mutual funds with confidence.
What exactly is a mutual fund?
A mutual fund is a system where many people pool their money together and an experienced manager, called a fund manager, manages the money and invests it in various good companies such as stocks, bonds, or other assets.
Example: Suppose you and 10 of your friends want to buy a large piece of land, but none of you has the money to buy it alone. So you all pool your money.
He deposited it. Then he entrusted a trusted friend with the task of buying a good piece of land with that money. Later, when the price of that land increases, all of you will share the profit. Mutual funds also work in the same way.
Many people pool their small amounts of money together in an investment pool and that money is managed by a fund manager. They research the market, analyze it, and decide which companies’ shares or other assets will make your money grow. When you invest money in a mutual fund, you are given some units. This is like a small part of owning the fund. The more units you have, the more your share of the fund’s profits will be.
How many types of mutual funds are there?
Basically, three types of mutual funds are very popular.
- Equity Fund
- Debt Fund
- Hybrid Fund
- 1. Equity Funds. These funds invest most of their money in the stock market or share market. That is, your money is invested in shares of different companies. Equity funds have the potential to generate higher profits. But they also carry higher risks. Because the stock market fluctuates. Who is it suitable for? It is great for those who want to keep their money for a long time, such as 7 to 12 years or more, and are willing to take risks.
- 2. Debt funds. These funds invest in relatively safe places. Such as government bonds or large company debt. They are less risky than equity funds and provide fairly stable returns. Who is suitable for them? Debt funds are good for those who want to keep their money safe and get a regular fixed income.
- 3. Hybrid Funds. These funds are a smart mix of equity and debt funds. While there is an opportunity to profit from the stock market on one hand, there is some safety and stability from bonds on the other. Who is suitable for them? Hybrid funds are great for those who want to take moderate risk and maintain a good balance in their investments.
Why are mutual funds so popular?
Knowing its benefits will also help you understand its importance.
1. Diversification. Mutual funds invest your money in different companies in different industries such as IT, banks and various types of assets. As a result, even if one company or industry does poorly, there is a possibility of profit from another place. This reduces the risk a lot.
2. Professional Management. Your money is being managed by experienced and skilled fund managers. They analyze the market every day and make the right decisions. You don’t have to watch the stock market every day. You don’t have to do research.
3. Liquidity. Most mutual funds are open-ended. This means you can withdraw your invested money at any time. However, some funds, such as EL Double AS, do not have the facility to withdraw money for up to three years. This is called a lock-in period.
4. Affordability. You can start SIP in Mutual Funds with just Rs. 500. This is very convenient for small investors.
5. Transparency. Mutual funds regulated by a government agency called SEBI are very transparent and safe. Each fund house regularly publishes the list of their investments and their performance.
How to start investing money in mutual funds?
Let’s learn some simple steps.
- ou will need to complete the KYC (Know Your Customer) process.
- For this you will need PAN card,
- Aadhar card, bank details
- and a passport photo.
- The good news is that now KYC can be completed online from home in just a few minutes. Decide which platform to use.
You can invest in mutual funds in several ways.
- You will save on commission by using the website or app of the government MNC Asset Management Company.
- Using online platforms like Grow Zerodha Angel One etc.
- Through a bank or mutual fund distributor. You may have to pay a slightly higher fee.
- Will you pay the money all at once or in small amounts?
SIP or lump sum? There are two main ways to invest.
- 1. SIP Systematic Investment Plan. This means you deposit a fixed amount of money every month. It is great for new investors and reduces the risk of market fluctuations. When the market is low, more units are available which can give you more profit in the long run.
- 2. Lunch Sum. This means you invest a lot of money at once. Lunch Sum can be a good option if you have a lot of money in your hand at once, such as a bonus or money from selling a property. Most experienced people recommend SIP for beginners. This is because it creates a habit of saving money regularly and you don’t have to worry about the market every day.
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