Manual Investing in Mutual Funds

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Higher Returns. Zero Commission. Instantly download your 80C investment proof. A mutual fund is a pool of funds collected from multiple investors which invests in assets like stocks and bonds. Each AMC will typically have several mutual fund schemes. The total size of the mutual fund industry in India crossed Rs 23 lakh crore in Liquidity: You can buy and sell most mutual funds on any business day.

Diversification: A mutual fund gives you exposure to a basket of stocks and bonds at a very low cost. If you had to buy them directly, you would need to invest a much larger sum of money. Low Cost: Mutual fund expense ratios are typically 1. This amount pays for fund administration, fund manager fees and much else. This is possible because these costs are spread between hundreds of different investors.

Their portfolios are also disclosed each month and various other details about are available in the public domain. You must first select a fund category. Broadly, equity funds should be chosen if you are willing to take a high level of risk and have a time horizon of more than 5 years. For a moderate risk appetite, you can look at hybrid funds. If you have a low risk appetite, you can stick to debt funds. Note that all mutual funds, even debt funds carry some risk.

Once you have chosen a fund category, you can select an individual fund by comparing its performance to its benchmark and peers over a reasonably long period of time. A few other factors that you can also consider are:. Fund Manager Experience - How long the fund manager has been in charge and what is past track record shows.

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Portfolio - Is the mutual fund getting high returns by investing in very risky, small companies? Is it getting its returns through asset allocation? What is the debt-equity split in the fund? Expense Ratio.

Why Mutual Funds?

Want to know which funds have been shortlisted by our research? Sign up for an account with Paisabazaar using the form above. You first need to complete KYC know-your-customer which is a one-time identity verification process. At Paisabazaar, the entire KYC process is conducted online. Once your KYC is done, you need to select a mutual fund and submit a purchase request along with payment. At Paisabazaar you can do this online as well, keeping paperwork and hassle to a minimum. Simply fill up the registration box above and follow the steps mentioned, for online investment.

Anyone can invest in mutual funds. The minimum investment can be as low as Rs You can also invest in the name of your spouse or kids.

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If your child is a minor below 18 , your details have to be mentioned while investing and you operate the account till he or she turns Mutual funds are market-linked investments and thus they can never be completely risk free. There are two major mechanisms of making money through a mutual fund — accrual and growth. In the accrual strategy, the investor invests and earns dividends from the scheme over time.

The accrual strategy is preferred by investors seeking income while staying invested. The growth strategy does not generate any returns while the investor holds units, but the value of the units usually increases over time and can provide future gains when the units are redeemed. Note that after the Budget, the growth strategy is more tax-efficient than the accrual strategy. Do not wait for a market correction or you may be left waiting a long time.

Corrections are very hard to predict and time correctly.

What factors should I consider before investing in mutual funds?

Instead, figure out your goals and risk appetite and invest without delay. Being market linked, there is some risk of loss with respect to mutual funds including loss of the principal amount invested. However the chances of losing all your money are low because of high levels of diversification and transparency.

There is nothing called growth stock mutual funds, however there is a growth option in case of mutual funds. In the growth option, gains come from growth in the value of the fund rather than through dividends. The gains can be realised when the investor sells his mutual fund units. However as these are market-linked investments, the previous performance of mutual fund schemes does not guarantee future returns. In case of multi-year investments, returns are annualised if returns over 1 year are considered.

NAV is the acronym for net asset value and it represents the price of individual mutual fund units. You can read more about it here. Mutual funds are market linked investments and do not provide guaranteed returns. Hence there is no interest rate for a mutual fund.

Returns are not guaranteed but they are potentially higher than various fixed return investments currently available in the market. The minimum investment amount may differ depending upon the fund you intend to invest in. But, the absolute minimum investment that you can start with, can be as low as Rs. Most mutual funds are open ended, meaning that you can sell them at any time. Close end schemes have a lock-in, typically years in length.

After this period, they mature and you cannot simply extend them as per your wish. There is a third set of schemes which have a lock-in but become open ended after the lock-in. For instance tax saving or ELSS fund have a lock-in of 3 years. After this time-period, you can sell these funds at any time.

Mutual Fund Definition – Know How to Investment in Mutual Funds

Different mutual fund categories are taxed differently such as equity and debt. In case of mutual fund dividends, the Dividend Distribution Tax DDT become applicable and is deducted at source by the fund. You can read more about mutual fund taxation, here. Open ended funds give you flexibility. You can invest in them and exit them on any business day. However due to their nature, they can bet hit by large, sudden redemptions.

Close ended funds are inflexible. However their closed nature safeguards the fund manager from the pressure of large redemptions and allows him to focus on delivering returns. For example Rs 10, in invested in a mutual fund each month. SIPs spread your investment and protect you from catching a market high bad timing.

Popular Mutual Funds Articles

They also average out your purchase price, reducing your risk. SIPs work best with equity funds and not debt funds. Lumpsums are a one-time investment. You should go for lumpsums only if you are highly confident of the fund you are investing in. Stock Advisor Flagship service. Rule Breakers High-growth stocks. View all Motley Fool Services. Trending Topics. Popular Sectors.

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