All about mutual funds | Honest review of top 7 facts in 2021

All about mutual funds- As much as we see ads on TV that mutual funds are right but somewhere in the mind there is a fear that to lose our money. We also can’t fully believe that ads.

This happens because we do not know what a mutual fund is and how it works.

Because most of the time we hear negative things about the share market since childhood.

Here I would like to inform you that there are about 500-600 mutual fund schemes available in the market and if you invest in the worst mutual fund even then in 99 percent of cases you can get a return of more than FD.

But you have to invest in the long term.

So there is no need to be afraid because in most cases you will make a profit in long-term investment.

Also if you select a very good scheme then you can get profit up to 18-20 percent.

So you should not avoid a mutual fund because it can give you a higher return than any other asset class.

You will find many more options to invest like- FD, gold, but if you want to earn a decent return then you have to think of a mutual fund.

All about mutual funds is a vast topic but here you will get to know every point very clearly.

Here are some most important things in all about mutual funds.

All about mutual funds
All about mutual funds

What is Mutual Fund ( All about mutual funds )–

Most people think that by a mutual fund we can only invest in the share market.

But you will get many options to diversify your investment while you are investing in a mutual fund.

Like you can invest in real estate, debt funds e.t.c. But when we compare the return with the risk of a mutual fund, we mostly do that with the context of the share market.

So you have to know well about the share market to understand mutual funds.

To know about the share market make sure you visit here and read this article.

There are three ways to invest in the share market.

  1. Do your research and invest yourself.

The advantage of it is you don’t need to pay anyone. And the disadvantage of it is- this is time taking. You have to give a long time to research properly.

And also not everyone knows how to find good stocks.

2. You can take the help of an investment advisor.

The advantage of it- you don’t need to give time but have to depend on the investment advisor. And the disadvantage is- the advisor will tell you that where to invest and where to not by taking a fee but you have to do those transactions on your own.

3. You can invest through Mutual Funds.

Here you don’t need to know about stock picking as well as you don’t need to track regularly and the fees are also very low.

Now I think you have a basic that what is the purpose of a Mutual Fund.

Particularly the purpose of an equity mutual fund is to invest your money in the stock market or to give you stock market exposure.

How a Mutual Fund works? ( All about mutual funds )–

This is the most important part of all about mutual funds. Let’s assume that you want to invest 15000 thousand rupees in the share market.

You want to buy shares like Eicher motors, Abbot, E.T.C.

Now if you want to buy shares directly then you can’t buy many shares like the above-mentioned shares.

Because the share price of just one share is high and you have just 15000 rupees.

It is also possible that you will not be able to buy just one share of a particular company with this money.

This is one of the major problems if you want to invest in the share market directly.

But mutual funds take a small amount of money from many individuals and invest that large amount of money in different stocks.

If you want to buy an expensive share by investing less money alone, then it will not be possible.

Here you will get this benefit in mutual funds because many people like you invested here and by that accumulated money the mutual fund can buy shares.

Now, you may ask how a few shares will be divided among so many investors.?

Here the mutual fund buys the shares and instead provides you some units of that mutual fund.

Suppose a total of two shares worth Rs 50,000 thousand have been bought and 100 people have invested that money.

And then here the mutual fund will make one unit for 500 rupees and provide it to everyone.

If you invest a thousand rupees here, you will get 2 units. If you invest 2000 rupees, you will get 4 units, like this.

So mutual funds allow you to invest in many companies for a small amount of money which would not have been possible if you were direct.

All about mutual funds
All about mutual funds

How the Mutual funds break the shares into units ( All about mutual funds )–

Now, how do the mutual funds break that shares into units? They make a fund management company.

Which is called AMC ( ASSET MANAGEMENT COMPANY). This company launches a fund and asks the public to invest money.

The company also has a fund manager with good experience in the share market who will manage the fund like where to invest, how much to invest E.T.C.

Now those who will be interested will invest according to their ability.

The amount of money collected in this way is called AUM ( ASSET UNDER MANAGEMENT).

Remember, you can sell these mutual fund units at any time.

The Advantages of Mutual Fund ( All about mutual funds )—

In this all about mutual funds topic, this part will increase your interest to invest in mutual funds.

  1. More diversification for less money.

If you want to start with very little money you can’t buy more shares from the direct share market but you can invest in a lot of shares while you are investing through mutual funds.

2. An expert is managing your money.

If you ask an individual expert to choose shares of 2000 rupees for you, maybe he will not do it because his fees might be much more than rupees 2000.

It will be very good for you because that expert has a lot of knowledge in this field.

In a mutual fund also the fund manager takes his fee but just because the fee is given by everyone, it becomes less for everyone. It is called the expense ratio.

Like if you are investing 100 rupees in a scheme then 98 to 99 rupees of that 100 rupees invested in that scheme and the company keeps the rest amount for the salary of the fund manager.

The expense ratio is better to be very less.

3.The mutual fund will buy and sell the shares on behalf of you.

Here you invested once, then the mutual fund will trade the shares on your behalf. You don’t need to think about this.

4.SIP facility.

Here you will get the SIP facility. Just you need to set an auto-debit process from your bank. After that, you don’t need to take any headaches.

It will be auto-debited from your bank on that date, you have set.

You can stop your SIP, increase your SIP amount, or decrease your SIP amount whenever you want. No charges for it.

Or if your bank has an insufficient amount or you failed to pay the SIP amount on time then also you just need to give the bank mandate charges.

The mutual fund company will not charge anything.

All about mutual funds
All about mutual funds

The Disadvantage of Mutual Fund–

If you want to know All about mutual funds then you should know about disadvantages also.

  1. Some mutual fund companies just want to take more and more money from the public.

Because the company will earn one to two percent of the invested money in the mutual fund. They don’t care about the return.

2.It is not up to the fund manager that when to invest the amount and when to redeem the amount. It is up to you.

If you give him/her money then he/she will invest that money. And if you want your money back then the fund manager has to sell the shares to pay you.

In this case, when the market is going down then the fund manager wants to invest more but the normal public wants to sell their mutual fund to take their money back.

Because they think that as the market is going down then they will lose their money.

So the public wants to redeem. Then the fund manager is forced to sell the shares at very low prices.

Although he/she wants more money when the market is down because he/she wants to buy more shares at very low prices.

So here the company and you both will be at loss.

The fund manager can invest in some stocks which can give you a higher return but these funds are very risky also.

So the fund manager only invests in the reputed funds.

So many times the return stays far below what you expected.

If you want to know that how to be a stock market investor then make sure you visit here.

Use of a Mutual Fund

This is also an important point in the sector All about mutual funds. You should use a mutual fund to achieve your goal.

Like a certain amount of money, you need after 15 years for your children’s education or retirement E.T.C.

If you need 20 lac rupees after 15 years then you have to calculate first that how much you should invest from now to get that expected amount after 15 years.

The amount you can calculate from an available app in the google play store.

You can invest in 3-5 funds for your various requirements like retirement, children’s marriage, children’s education, foreign vacation e.t.c.

You should choose some safe funds for some requirements like your retirement, children’s education, children’s marriage.

Because you can not choose risk funds for these kinds of purposes.

But yes can choose a little bit risky fund for your vacation goal because it is not necessary.

In this way, you can create your goal plan. But this is just an example. You have to do it on your own or you can take an expert’s advice.

This is also a very important part of all about mutual funds topic.

If there is any query related to this all about mutual funds topic then you can comment below.

All about mutual funds
All about mutual funds

FAQ

1.Can you get rich with mutual funds?

Yes, surely you can be. But you need to pick some good funds to invest in as well as you have to invest for a long time.

2.What is the safest type of mutual fund?

As it is related to the stock market that is why there will be some risks that you can’t ignore.
But comparatively, you can check index funds to invest in.
This is not
investment advise to you. Consult with an expert before investing.

3.How to invest in mutual funds?

If you have a DEMAT account then you can invest through that. If you don’t have then you can open it.

What are the types of mutual funds?

Most mutual funds fall into four categories. Like- money market funds, bond funds, stock funds, target-date funds.

All about mutual funds
All about mutual funds

You can open a DEMAT account at ZERODHA.

Check UPSTOX HERE.

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