When it comes to a mutual fund, there is no denying the fact that it is surely one of the most popular ways of making an investment and building wealth. But things are difficult for those who don’t know the nitty and gritty of MF, especially if you are a beginner. Yes, that’s right! For beginners, investing in MF is complicated and confusing as they don’t know from where to start.
However, keeping this thing into consideration, we are here to give you a complete beginner’s guide to invest in a mutual fund and ultimately help you to understand what they stand for, how they work, and the things you need to keep in mind while investing. So, without wasting any time further, let’s just begin.
What is an MF:
Let’s just put it in that way- a mutual fund is one of the safest modes of investment, actually a pool of money provided by the individual investors, companies and other organisations. To help the investors or you can say to liquidate the money in the market, fund managers are hired. Yes, whatever cash investors have, these fund managers invest the same in different schemes after through research and analysis. The main objective of these managers is to help you in reaping the maximum benefits in the future while ensuring that your hard earned money will be in safe hands.
Now that you know what MF is all about, its time to understand Open and Close Ended Schemes. So, go through this article below and know more about the same.
Open-ended Funds: In open-ended schemes, the investors can anytime enter or exit in a fund as per his/her convenience. The buying and selling of units will remain same even after the initial offering i.e. NFO period. Basically, the units are bought and sold at the Net Asset Value (NAV) declared by the fund. In these types of funds, whenever a fund house repurchases or sells the existing units, it would not be wrong to say that number of outstanding units goes up or down. Hence, that is why in these types of funds, the unit capital keeps varying.
Close-ended Funds: If we talk about close-ended funds, the unit capital, in this case, is fixed and they sell only a specific number of units. The investors cannot buy the units after its NFO period is over , unlike in open-ended schemes, which means that a new investor cannot enter nor the existing investor can exit till the scheme ends. But, one thing that needs to be mentioned here is the fact that in order to provide investors a way to exit before a term, various fund houses list their closed-ended fund schemes on the stock exchange.
How to Select a Right Fund:
Your next focus should be on selecting a fund that is right for you. Well, the key here is to select a fund depending upon its investment consistency and philosophy in terms of maximum returns. Before entering into a fund or selecting a right type, it is you who need to decide your needs first and then take the next step.
- The first and foremost thing you need to decide is actually your financial goals.
- The next comes the purpose of investment, it is for your child’s education, retirement or just for the sake of savings.
- Think about the time-frame. Would you able to invest for 10 months or is it 10 years? Raise a question from inner self after considering your monthly expenses.
- Are you ready for the risks involved in an MF? Are you in a position where you can manage the ups and downs of the market for the sake of higher returns?
How to Invest in an MF:
If we talk about how to invest in an MF, you can easily invest your hard earned in the same, if you already have a brokerage account. Here, you can go for the mutual fund shares just like a share of stock. And, in case you don’t, you can visit the fund’s web page or get in touch with the experts so as to request for the information and application. If you are a beginner, it would be advisable for you to hire an expert fund manager as he/she will help you out in every aspect.
Well, at the end, we are hopeful that this guide to invest in a mutual fund will be helpful for you in the future.
When it comes to investment, it would not be wrong to say that the first challenge that usually every investor faces is basically the availability of a plethora of options. Yes, right from stocks, shares, bonds to money market securities, there is no denying the fact that every option comes with its own set of benefits and challenges. So, here arises a question why should investors start investing in mutual funds in India Well, are you curious to know the answer of the same? I am sure, you must be. Read this article below and clear all your doubts.
If we talk about mutual funds, they allow the investors to pool their money for a diversified section of securities, which is generally taken care by the professional fund managers. It comes with a wide range of products such as fund of funds, exchange-traded funds, fixed maturity plans, sectoral funds and what not. Well, be it convenience or financial gains, mutual funds give numerous benefits to all the investors out there. So, let’s just throw some light on the list of benefits one can avail, while investing in MF.
Beat Inflation: With mutual funds, investors can generate better inflation-adjusted returns, without even spending a lot of energy and time on it. Yes, many people think that their money will grow in a bank as they don’t consider the fact that inflation can nib away its value. Let’s take an example to understand this point. Suppose you have a saving of ₹100 in your bank account. Say with this money you can buy 10 water bottles. Moreover, on this saved amount, your bank is offering you an interest of 5% per annum, thus as a result by the next year, you will have ₹105 in your bank account.
Now, let’s assume in that year the inflation rose by 10%, thus the cost of the same water bottle now reaches to ₹11. So, now it is no more possible for you to buy 10 water bottles in ₹105. This is where the mutual fund investment comes into the picture, giving you an ideal investment option so as to place your savings for a long-term inflation so that the purchasing power of your hard-earned money does not plummet over the years.
Expert Managers: With years of experience and in-depth knowledge, the services offered by the experts or we call them as fund managers allow you to achieve your objectives in mutual funds. They handle your financial decision and help you in choosing the best scheme to invest your money, and when you get out of the same that will give you higher returns in the future.
Convenience: If you look at the convenience, there is no denying the fact that investing your hard earned money in mutual funds is a time-saving opportunity and comes with a lot of convenience, there is no doubt on that. The investors can enjoy their life while their money or investments earn for them. Your fund manager will take all the burden on his shoulders, thus allows you to live a hassle-free life.
Low Cost: One of the biggest advantages that come with mutual funds is the fact that it is a low-cost mode of investment. Yes, you read that absolutely right! There are many stock options available that generally require a huge chunk of capital, and which is not possible for young professionals to give away the same. Whereas, MF is comparatively less expensive as one can start with as low as ₹500 and reap the benefits in the long term.
Diversification: Another biggest USP of mutual funds is the fact that they are diversified, which means the money that you invest will be distributed across a diverse range of assets. It actually lowers the risk factor to a large extent. With diversification, the loss from one security gets compensated with gains made in another.
Liquidity: In the case with open-ended schemes, the investors have the advantage of getting their money back instantly as per the NAV(Net Asset Value). You can anytime buy or sell the assets if you are in open-ended schemes, which means MF offers liquidity to the investors.
Now that you know why should you start investing in mutual funds in India? So, what are you waiting for? Go and invest your money to gain the maximum benefits in the future.