Ladies & Gentlemen, if you have no clues about Mutual Funds, At the end of this Article You will be 10X times smarter, Financially. In this article, I'm going to discuss the following questions that you have in your mind.
1. What are Mutual Funds And What are the different types of them?
2. How to Pick the Best Mutual Funds?
3. How to open a Mutual Fund Account?
I'm not saying that the particular Mutual Fund Is Best, Or I'm not sponsoring any mutual fund. The purpose of this Article is to provide you the Right Information.
So let's begin . . . . . . .
1. What are Mutual Funds And What are the different types of them?
Mutual Fund collects money from people like us. Like Rs.1000 from me, Rs. 1000 from you & also from other people, and creates money pool.
A fund manager then uses this pool (Collected Money From People) to invest in stocks, Bonds, and Assets. We don't have to worry about where it is being invested because the Fund Manager takes care of it & For taking care of our Money he took a commission of 1% to 2% which is called as Expense Ratio of that particular Mutual Fund.
If you want to Invest Long term, Mutual Fund is a great option. I said Mutual Fund is a great option because instead of sitting idle, our money will Earn for us.
In this condition, our Money is actually working for us and creates more money as time passes.
I think you have one question Like me. Right??? And What is that Question? Most of you are thinking that,
How Can I Be Sure That Mutual Fund Will Not Run Away With My Money???
Let me clear you that, Mutual Funds are regulated by SEBI. ( Security And Exchange Board Of India ). So, Running away is not possible.
However, If you choose a bad Fund Manager having low experience or I will say a bad Fund Manager, Then He or She might lose your money by investing in bad Stocks.
But don't worry I'll tell you What to Do so that doesn't happen.
So, let's first find out the different types of Mutual Funds that are available in the market. There are three major types.
Types Of Mutual Funds:
A) Equity Funds - ( Risk: High Returns: High )
These Mutual Funds invest in Stocks and shares of Companies. They are considered High Risk but also Give High Returns.
B) Debt Funds - ( Risk: Low Returns: Low )
These Mutual Funds invest in Debt Investments like Government Bonds and debentures. Debt Mutual Funds investments are safe but their returns are also less.
C) Hybrid Funds - ( Risk: Medium Returns: Medium)
As the name suggests, they are Hybrid. These Mutual Funds invest in both Equities as well as Debt. Their aim is to give you Moderate returns at Moderate risk.
I think the reason, Why we don't invest in Mutual Funds is because there are so many in the Market. We don't know which one to pick !!! So before choosing any Mutual Fund to invest in, First, let's learn how to pick the best Mutual Fund?
2. How to Pick the Best Mutual Funds?
The Most Important thing is choosing the best Mutual Fund that will fulfill our financial goal. So before selecting any Mutual Fund that is available in the market, Please check these Five points.
1) Short Term:
If you want to Invest short-term let's say 1 year Or 2 years; Then don't choose equity funds, Choose a Debt Fund.
Because they are lower risk than Equity And also give more returns than the bank.
2) Long Term:
If you want to Invest Long-term, Then there are two options.....
a) Lump-Sum: Lump-Sum is when you give a large amount of money at a time. Say above 5 Thousand Or 1 Lakh rupees. In a simple way, a lump sum means you are putting an amount of money at one time.
b) SIP (Systematic Investment Plan): SIP is when you choose a small amount of money say Rs.500 or Rs.5000 And every month that amount of money will directly move from your Bank Account to your Mutual Fund Account.
If you are new to Mutual Funds, SIP is the best option.
3) Mutual Fund Schemes:
Now, the main topic is Which Mutual Fund to pick? The Mutual Funds will be Categorized into Three types as follows:
a) Large Cap: Large-cap schemes invest in Big companies that are already well established. So in this type of Company risk is less.
b) Mid Cap: Mid-cap schemes come with Moderate risk, but also with Moderate returns.
c) Small Cap: Small-cap schemes come with High risk because these schemes invest in smaller companies. But as you know if you are able to take more Risk, then returns are also high.
If you are new to Mutual Funds, I would suggest that you pick a Mutual Fund that falls in the Large Cap scheme.
4) Mutual Fund Parameter:
a) Returns- Check at least 10 years of their track record.
b) Entry & Exit Load- These are the fees for Entering and Exiting that scheme.
Last year I made a mistake, I exited from one of my Mutual Fund schemes without checking the Exit load condition & got an Exiting load of 1%. So, please keep this in your mind before exiting from your Mutual Fund schemes.
c) Expense Ratio- The expense ratio means, How much the Fund Manager charges you for Maintaining your account. It usually ranges between 1% to 3%.
5) Index Fund:
In an Index Fund, you don't need a fund manager in between, so the Expense ratio is much less.
Most of the Investment advisor suggests that If you are new to Mutual Fund, Just buy NIFTY50 and SENSEX Index Fund.
Personally, this is what I have invested in along with some other schemes.
So these are the five things that you must keep in mind before you pick a Mutual Fund scheme.
3. How to open a Mutual Fund Account?
1) Select A Mutual Fund :
Select a Mutual Fund you want to invest in.
While selecting a Mutual Fund, keep in mind the above Five things that we've discussed in the second question.
2) Investment Amount Or SIP Amount :
Figure out how much money you want to invest in.
Select whether you want to invest at a time like a Lump-sum Or decide an SIP amount.
3) PAN Card :
The third thing you need to start a Mutual fund Account is a PAN Card which is a KYC Complaint.
Finally, After doing these three things, you can either go to that Mutual Fund's branch office Or you can simply visit their Website.
For Example:
- sbimf.com
- icicipruamc.com
- hdfcfund.com
- axismf.com
You'll just have to enter your details, your SIP amount, and the time period, And your Account will be set Up !!!
That's it. That's all it takes to set up a Mutual Fund Account.
Finally, I gave you all the information, you need to start investing in Mutual Fund. Now your job is to figure out which Mutual Fund is best for you & How much amount you are going to select for SIP Or Lump-Sum.
NOTE - Mutual Fund Investments Are Subject To Market Risk, Read All Scheme Related Documents Carefully
0 Comments