What are Mutual Funds?

MUTUAL FUNDS-Planning of your personal finance, and invest in a manner that you can fulfill your future goals, is a tricky part. Mutual funds are an ideal investment vehicle for investors who do not know much about investing or do not have much time to get latest updates on equities or stock market.

Mutual fund is a set of shares, stocks and bonds managed by portfolio managers. A mutual fund receives money from investors and invests on their behalf. It gives access to small and individual investors also to invest. Investors can choose a mutual fund scheme according to their financial goal. Mutual Funds are registered with SEBI(Securities and Exchange Board of India) Mutual Funds allows to invest even a small amount of money of Rs. 500 per month in the form of SIP. Some types of mutual funds are Equity mutual funds, Liquid/Debt mutual fund, Index mutual funds etc.

What is Net Asset Value (NAV)?

Mutual Fund NAV is the per unit market value of a mutual fund scheme. It doesn't fluctuate during market hours, but is settled at the end of each trading day. If you divide market value of your investment in a scheme by the number of current fund units, you get the NAV. Usually, mutual funds(new fund offer NFO) begin with a unit-cost of ₹10 and it rises as the fund’s assets under the management grow. So, popular funds have a higher NAV than a less popular one.

The Systematic Methods to Invest in Mutual Funds

You can invest lump sum, but there are also options available for investors who wants to invest systematically on regular basis.

(SIP) Systematic Investment Plan-

This is the best way to invest on regular intervals in your selected mutual fund scheme/s. In SIP, a fixed amount is deducted from your savings account on regular intervals and invested in mutual fund you choose to invest in. Its the Ideal investment for those who have regular incomes(salary) and wants to invest to achieve a future goal. Regular intervals can be weekly, fortnightly, Monthly etc.

(STP) Systematic Transfer Plan-

This is an automated way of transferring money on regular intervals from one mutual fund to another. If you have a lump-sum amount to invest and you want a balanced return by reducing risk you should opt STP. The most common way of doing STP is to transfer money from a debt/liquid fund to an equity fund. By this method you'll get dual benefit of return of liquid as well as in equity scheme.

(SWP) Systematic Withdrawal Plan-

This plan is used to redeem a fixed amount of money from a mutual fund scheme to your savings bank account on regular intervals. An SWP can be used to obtain regular income in retirement. It is an opposite of SIP. It is one of the strategies to deal with market fluctuations. By STP you can customize the cash flow as per your requirement. You can choose either to withdraw or to reinvest the redeemed amount in another scheme on regular intervals.

Conclusion-

In my opinion, A person must invest in mutual funds because of its various benefits like diversification(equity, bonds, debt), easy process of investment, convenient for every investor, professionally managed etc. All these qualities of mutual fund make it a good choice.

GOOD LUCK, HAPPY INVESTING!!

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Fee and Charges involved in Mutual Funds

Types of Mutual Funds

8 Major Benefits of Investing in Mutual Funds

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