Lingering question is what is Mutual fund investment? What does it do? What is involved? I bet this has no end. Let’s venture directly to this mutual fund thing. So mutual fund happens to be a company which will gathers funds/finances from people who want to invest. The money is placed or pooled in securities which will later gain more profits. This can be based on stock exchange markets, bonds or short-term debts.
This combination is classified as portfolio. We have all likely heard of shares, now investors will buy shares in mutual funds. The shares from the investors represents some income for the investor thus making them shareholders or owners.
Why do we need mutual funds?
The question can also phrase why do people buy mutual funds?
- Liquidity:investors can also change the share to other assets. This called redeeming the shares one is flexible to redeem anytime.
- Smart way to invest: this a better way to invest your funds, since the money fluctuates according to the market. You can buy shares when they pick though using a profession knowledge is required.
- Diverse: the market is broad and one can invest in many other markets in case one fails.
Types of mutual funds
Mutual are set according to the uses or objectives, we have different mutual funds listed below:
Note this can also be enveloped in to types if taken as structures which is open ended scheme or close ended scheme.
- Equity scheme:
This where investors use mutual funds for investment plans and gaining capital. It can be a long term plan or medium according to the investor. Note this scheme has higher risk compared to others though offering best returns.
- Debt funds
Here you invest your funds in a fixed security example of this being bonds, commercial papers. Its risk free and gives steady income
- Balance funds
This comprises of both debt and equity funds, here one is promised of regular income and growth. Basically its much safer and long term plan for investors.
- Tax saving funds
The plan helps save on income/capital and also save on tax. The plan gains majority who get income with tax discounts.
- Exchange-traded funds
This the normal stock exchange, it also deals with assets like gold, oil and foreign currency.
- Open-ended and close –ended schemes
Open-ended the stocks are flexible as they can be bought and sold. The investor is at liberty of leaving and entering back to the market according to the market flow.
In close-ended the capital is fixed and investors not around to leave or buy when one market is closed.
How to start mutual investment?
- Offline investment using a fund house.
Investors are required to visit fund house, here they can buy mutual fund. one should carry proof of address, identity card, cancelled cheque and passport photo. At the fund house you will fill an application form.
- Through a broker
This the person who will assist in all the buying and selling of the units. They learn the market and know where to invest. The broker will provide all information regarding the market ensuring you gain positive results.
- Using the website page
One can get the mutual funds online through the fund house website page. Enter your details and also follow the given instructions. Remember to compete the KYC section plus the Aadhaar card number followed by the PAN card. the system will be verified and with this you are set.