Friends, you must have heard about Mutual Funds, but in the absence of information, what is this Mutual Fund? And how does it work? Most people are afraid to invest in it, as well as not knowing the right way and platform to invest, many people are hesitant to invest in it. Today we will give you information about mutual funds in simple language and will tell why it is right and how to invest in mutual funds.
A mutual fund is a company that collects money from different people, which it invests in stocks, bonds, and other financial assets. All these combined holdings (stocks, bonds, and other assets) of that company are called portfolios of that company. Each mutual fund is managed by an asset manager.
There is a very good and easy way to earn money from mutual funds. It is not necessary that you have thousands of rupees to invest in this, but you can also invest in it at the rate of only 500 rupees per month.
What is Mutual Fund? What is Mutual Fund?
Mutual Fund is a method of investment, through which investment can be started without even knowing the stock market and with very little money Mutual fund is an easy and safe way in which we do not invest our money ourselves but in asset management. Company (AMC).
As the name suggests, a mutual fund is a fund consisting of small investments made by an asset management company (AMC) by a fund manager, who is an investment guru or has a lot of experience in investing. There is a person with whom, little by little, is invested in different places.
In mutual funds, our money is invested in the stock market or stock market, bonds, securities or commodities etc. In mutual funds, the investor is the owner and sharer of whatever shares he gets from his invested money, whatever profit is made in the investment. The investor can get profits and losses in proportion to the investment in it.
Types of Mutual Funds
There are many types of Mutual Funds. We can divide them into 2 categories. One is the type of mutual fund on the basis of structure and the second is the type of mutual fund on the basis of the asset.
A) Types of Mutual Funds on the basis of Structure
- Open Ended Mutual Fund
- Close-ended Mutual Fund
- Interval Funds
It allows investors to trade funds at pre-determined intervals. And trading of funds can be done on that fixed period.
It was talked about the type of Mutual Funds on the basis of the structure, now we will talk about how many types of Mutual Funds are taken on the basis of assets.
B) Types of Mutual Funds by Asset
- Debt Funds
- Liquid Mutual Funds
- Equity Funds
- Money Market Funds
- Balanced Mutual Funds
These types of funds give investors stability in income on the one hand and on the other hand they also provide impetus to income growth.
Apart from these funds, there are many types of funds, but these are the main and most used funds.
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What is the difference between Equity Stock and Mutual funds?
Mutual funds are a way of investing in a single fund by collecting money from different investors. This fund is managed by a fund manager, who invests the money collected from various investors in bonds, and stock markets. Units are allotted to the investor for his money. This unit is called NAV.
Here we are going to tell you what is the difference between equity stock or share and mutual fund and which way is better to invest. If seen in a way, there is not much difference between the two, both ways are invested in stocks or shares of companies, so let us know how stocks and mutual funds are different.
- actually stock market There is a direct way to invest in the stock in which a sole investor or angel investor can easily invest or trade in any stock present in the stock market through his Demat Account.
- In Mutual Fund also, the investor invests his money in stocks, etc., but in this, the investor is not invested directly but it is done through a fund manager. The fund manager is a successful investor and a very experienced person in terms of finance. Who decides where to invest our money?
- Investing in the stock market or stock is very risky because to invest in any stock, it is necessary to do good research about it, otherwise, your money can also be sunk, in the same mutual fund, and this work also becomes easy. Because the fund manager decides in which stocks to invest our money.
- Mutual Funds are a suitable option for those investors who do not have knowledge of the stock market or they cannot do much research etc. or they have lack time for this.
- However, investing in mutual funds is more expensive than investing in the direct stock market, in which some charges are also kept by the asset management company and the profit earned from the money invested is distributed to the investors in the ratio of investment.
- Through mutual funds, investors’ money is invested in stocks of different sectors by the fund manager, due to which there is less chance of loss in it.
In mutual funds, investors share the cost and profit of the investment. The investor decides how much risk they want to take, and their return will depend on how well the investment performs.
Mutual funds can be passively or actively managed. An actively managed fund has higher returns, but it also carries more risk for investors who choose that option.
Simply put, Mutual Funds are a fund made up of many people’s money. In which the money invested is used to invest in different places and it is tried to give maximum profit to the investor from his amount. Hope you have understood what is Mutual Fund.
Who is a Professional Fund Manager?
The work of managing the fund is done by a professional person called a professional fund manager .
The job of a professional fund manager is to look after the mutual fund and make more profit by investing the fund money in the right place. If put in simple words, its job is to convert the money invested by the people into profits.
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What is the role of SEBI in Mutual Funds?
Mutual Funds are registered under SEBI (Securities and Exchange Board of India) which regulates the market in India. The work of keeping investors’ money safe in the market is done by SEBI . It is ensured by SEBI that any company is not cheating with the people.
Mutual Funds have been present in India for a very long time, but even today people do not know much about it. In the early times, people had the impression that Mutual Funds are only for the rich class.
But this is not the case at all and in today’s time this perception seems to be changing. The trend of people has increased towards Mutual Funds. In today’s time, Mutual Funds are not only for the rich class.
Rather, any person can invest in Mutual Funds at the rate of only 500 ₹ every month. The minimum amount to invest in Mutual Funds is Rs 500.
Benefits of Mutual Funds
Although there are many benefits of Mutual Funds, today I will try to give complete information to you about the important benefits.
1. Professional Management
The money you invest in Mutual Funds is managed by Mutual Fund experts with experience and skills.
2. Diversification (Diversity)
The basic mantra of safe investing is that instead of putting your money in one place, divide it in many places and invest in many places. Every mutual fund invests money in different places.
3. Variety (Options)
In Mutual Funds today there is something for every kind of person. There are all kinds of funds available for those seeking high returns, from maximum safe funds for those seeking maximum returns, to maximum safe investments.
4. Convenience (Facility)
You can invest in Mutual Funds very easily. You can also withdraw money from the funds with the same ease. To invest, you have to fill out a form that you can fill out online or offline both from anywhere or anywhere.
5. Affordable (cheap)
The share price of big companies is very high. Many times you want to invest money in those companies but you are not able to do so because of your budget. Whereas in Mutual Funds many people have the money together, then your money is invested in big companies.
6. Tax Benefits
Whenever you invest in the stock market, you have to pay tax for buying or selling shares. But in Mutual Funds, you get tax exemption.
Before investing in Mutual Funds, collect all the documents and all the information related to the funds. You yourself will be responsible for any damages.
History of Mutual Funds
The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India (UTI) on India at the initiative of the Reserve Bank of India (RBI) and the Government of India.
Its main objective was to attract small investors and make them aware of the topics related to investment and the market.
UTI was formed in 1963 under an Act of Parliament. It was established by the Reserve Bank of India. And initially, it worked under RBI.
In 1978, UTI was separated from RBI. The Industrial Development Bank of India (IDBI) got regulatory and administrative control in place of RBI. And UTI started working under it.
The development of Mutual Funds in India can be divided into several stages. As the first phase was from 1964 to 1987, in which UTI had a fund of ₹ 6700Cr.
After this, the second phase starts in 1987, in which the entry of public sector funds started. In this time, many banks got a chance to make Mutual Funds.
SBI created the first NONUTI mutual fund. The second phase ended in 1993, but by the end of the second phase, the AUM ie Assets under management increased from ₹ 6700Cr to ₹ 47004CR. In this phase, there was a lot of enthusiasm among investors in mutual funds.
The third phase started in 1993 and lasted till 2003. In this phase, private sector funds were approved. In this phase, investors got more options for Mutual Funds. This phase ended in 2003.
The fourth phase started from 2003 and is going on till now. In 2003 , UTI was divided into two separate phases. First SUUTI and second UTI mutual fund which used to work according to the rules of SEBI MF. The effect of the 2009 economic recession was read on the whole world.
Investors in India also suffered a lot. Due to this, people’s confidence in mutual funds decreased a bit. But slowly this industry started coming back on track. In 2016 , the AUM was ₹15.63 trillion. Which was the highest ever.
The number of investors is almost above 5 CR and lakhs of new investors are being added every month. This phase has proved to be golden for mutual fund
What is the meaning of a mutual fund?
Mutual funds are investments in stocks, bonds, and other securities that trade on public exchanges. A mutual fund pools investors’ money together to buy these securities. Mutual funds give small investors access to a professionally managed portfolio of stocks, bonds, and similar investments that would cost much more than if they were invested individually.
How does mutual fund work?
Mutual funds pool money from multiple investors together and use that pooled money to buy securities. A mutual fund is a type of investment where the management company pools together the money of several investors and uses that deposited money to buy securities for these investors. Mutual funds are offered in different types like stocks, bonds, money market funds, international funds, etc.
What did you learn today?
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