People who do not have knowledge of share market, or they do not have time for share market. Those people see a company that invests their money in the stock market.
And save their money with no risk. Every year they get their returns by 10 or 20 percent. Thinking of this, you invest your money in that company. And that company is a SEBI registered company. It is also called fund house.
And there is also a fund manager of that fund house. And his entire team looks after this fund house. He invests your money in the share market. That is what we call mutual funds.
The company that lives between the share market and you. It is called AMC. Meaning that company remains an assets mangment company. Which puts your money through a fund manager who has knowledge of a professional share market.
Their entire team invests your money in the share market or anywhere else. And gives you good returns. And in return for returns, she takes commission from you in some amount.
How do Mutual Funds work?
Mutual Fund means – is a lot of money collected from people to invest. from, is collected for the benefit of the people.
In this the people collectively benefit. Mutual Funds are managed by expert fund managers of this industry as everyone’s money is invested in it. Here diversified means the fund manager invests in different sectors and industries for better and regular profit.
type of mutual fund
Before you invest money, you should know in which type of mutual fund you have to invest money. After that which company is the best, let’s first talk about which type of mutual fund you should invest money in.
1. Equity funds
Those who invest in the stock market i.e. the stock market, they also have high risk and their returns are also high, we call them equity funds. Now these are also of three types. And the risk is also less. And even a little penny also gives more return.
Small cap equity fund- These are small companies, their fund managers invest more risk in order to make the company grow quickly, they have the highest risk. And the returns are also high.
2. Debt funds
In these the risk is also high, and the return is also high. If you invest in it. So your money is invested in government bond, money market, bank certificate, commercial paper etc.
3. Hybrid funds
These invest in both equity funds and debt funds, thus providing higher growth potential as well as higher returns.
4. Index Fund:
Index fund invests in all those stocks which are included in the selected index. Hence the volatility of this type of fund depends entirely on the index.
5. Sector Funds:
Sector funds invest in the shares of companies in one economic sector. Hence, you can choose mutual funds that invest only in stocks of sectors like software, steel, cement, or oil. Hence, investors of the fund can make substantial gains if the sector picks up.
6. Tax Saving Funds:
These funds provide tax exemption under section 88 of the Income Tax Act, 1961 on annual investment up to Rs.10,000/- per person. (20 per cent for income below Rs 1.5 lakh, and 15 per cent for income below Rs 5 lakh).
Like equity and sector funds, these also focus on investment growth as they can invest in such funds In which money cannot be withdrawn before at least three years. Due to this, fund managers can make long term investments.
7. Balanced Funds:
These funds provide increased investment as well as income. These funds make balanced investments in shares, bonds and other securities, ie equities as well as fixed income securities.
Benefits of Mutual Funds:-
There are three major advantages of doing:
1. By investing in mutual funds, you are handing over your money to trained, experienced people who will invest your money well for you. This is especially beneficial for small investors who do not have the understanding and experience to invest properly in stocks, nor the economic ability to purchase the services of expensive brokers or advisors.
2. Another advantage of investing in mutual funds is diversification – which small investors with small investments cannot get in the stock market.
3. Mutual funds have the advantage of more liquidity than stocks, due to the presence of more capital and a large number of investors. If you want to recover your money quickly by investing it for a short period of time, then mutual funds will be suitable for you.