What Are Mutual Funds And How To Invest In Them?

What Is A Mutual Fund?

What Are Mutual Funds And How To Invest In Them?,To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. Essentially, the money pooled in by a large number of people (or investors) is what makes up a Mutual Fund. This fund is managed by a professional fund manager.
It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value or NAV. Simply put, a Mutual Fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

Types Of Mutual Funds –

What Are Mutual Funds And How To Invest In Them?,The Securities and Exchange Board of India has categorized mutual fund in under four broad
categories are below of mutual fund will help u:

Equity Mutual Funds
Debt Mutual Funds
Hybrid Mutual Funds
Solution-Oriented Mutual Funds

Hybrid Mutual Fund Schemes: 

What Are Mutual Funds And How To Invest In Them?,These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his risk appetite. Based on their allocation and investing style, hybrid schemes are categorized into six types.
These schemes are devised for particular solutions or goals like retirement and child’s education. These schemes have a mandatory lock-in period of five years.

What Are Mutual Funds And How To Invest In Them?

The first thing here is to understand what kind of portfolio you need. Your funds will need to be divided into different asset classes to achieve the returns that you want. This is known as asset allocation. The ideal asset allocation route would help you to invest in a number of funds that are based on your risk profile. Your risk profile will also help determine the extent to which you should invest in each asset segment such as equity and debt.


Shortlisting and zeroing in on the right funds represents the most important part of investing in Mutual Funds. Once you are done with the asset allocation that best reflects your needs, the next step is to look for and compare different Mutual Funds on the basis of their past performance and investment philosophy. For this, you should refer to the shareholder reports and prospectuses provided by AMCs. The prospectus will detail the information related to the Mutual Fund from a legal perspective while the shareholder report can help you understand the past performance and consistency of returns.

http://gkhubzone.com/2019/03/25/the-truth-is-you-are-not-the-only-person-concerned-about-compare/,Next, you need to determine what the horizon for these goals will be. The more money you need, the more risk you might need to take if you don’t have much time. You can afford to take lower risks if your goal is a long-term one. However, understand that when you invest in high-risk funds for the long term, the risks will become considerably lower as your goal nears. You should choose your Mutual Funds accordingly.

Once you have factored in the points given above, you should be able to shortlist funds based on them. Here are some tips for picking the right funds:When looking for a Mutual Fund, understand its past history. Look at how it has done during market upturns as well as crashes.Look for the best funds in the asset class (equity, debt or hybrid). Ensure that they will help you meet your financial goals in the time frame that your need. They should also be according to your risk profile.Check the performance of the fund for different time frames such as 3 months, 6 months, 1 year and so on. While you could check for last 3 years performance in case of debt funds, you can go up to 6 years for equity funds.




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