Mutual fund Explain:

Today we will know about a new technique of investing in stock market. Today we will know how it works Mutual fund is a means of investing in stock market where many people pool their money in a professionally managed portfolio invests in This portfolio invests in stocks, bonds, gold etc. This money is managed by a specialist fund manager, whose main objective is to earn profits and minimize risk.

Mutual funds are the best platform for people who want to invest but don’t have enough knowledge or time.

How do mutual funds work?

1. To raise money.

• An AMC (Asset Management Company) pools money and formulates a policy to invest it in the stock market

2. Fund Management

– In which the AMC invests the money through a specialist fund manager. That money is spread across various trends like stocks, debt instruments, gold ETFs, etc. So that the investor’s risk can be reduced and the rate of profit can be increased.

3. Distribution of profits

The profit from the fund is shared with the investors in the form of dividend or the profit is entered in the form of NAV (Net Asset Value). Thus investing in mutual funds benefits the investors.

What are the benefits of investing in mutual funds?

1. Investment Management

If you don’t have the knowledge of share market or time to understand share market then fund manager of mutual fund handles your investment for you.

2. Diversification

The money you invest in a mutual fund is spread across various financial instruments, reducing your risk.

3. Simplicity through SIP

A SIP (Systematic Investment Plan) can be started with a minimum of 500, which develops your investment habit.

4. High Returns

Long-term investments, especially in equity funds, offer the opportunity to earn high returns, which add to your wealth.

5. Regularization by SEBI

You get more protection in mutual funds as they come under SEBI regulations.

6. Tax Avoidance

By opting for ELSS (Equity Linked Saving Scheme), you can save your tax.

Types of Mutual Funds:

1. Equity Fund:

This mainly involves investing your money in stocks.

Example: A fund associated with Nifty 50 or Sensex.

Advantages: Equity funds provide high returns in the long term.

Risk: Risk in equity funds is high because it Depends on the ups and downs of the market.

2. Debt Fund:

In a debt fund, your money is invested in bonds and fixed income securities
Advantages. This fund offers stable returns with low risk.

Usage: This fund is excellent for short-term financial goals.

3. Hybrid Fund:

This fund invests in both equity and debt.

Example: Balanced Advantage Fund.

Advantages: Moderate risk but strong returns.

4. Gold ETF:

Gold is invested directly or indirectly which moves up and down according to the market price of gold.

Advantages: Provides protection against inflation risk.

5. ELSS (Equity Linked Savings Scheme):

These funds are excellent for tax saving and high returns.

Lock-in Period: Up to 3 years.

6. Index Fund:

These funds track the performance of indices like Nifty 50 or Sensex.

Advantages: This fund has low cost and fast growth.

How to invest in mutual funds?

1. Decide what you want:

Are you investing for short term profit or long term goal? You have to decide this first.

2. Select Fund:

You can choose the fund according to your goals and risk tolerance.

3. Complete KYC:

Keep your PAN card, Aadhaar card and bank account ready. Demat account is also Required.

4. Start SIP:

Start with a small amount that is comfortable for you with a monthly SIP.

5. Review the fund: 

It is important to check the performance of your fund from time to time so that you stay informed about your investment.

Points to keep in mind while investing in mutual funds:

1. Market Risk:

All mutual funds are associated with market risk, which is important to know.

2. Expense Ratio:

AMC charges a fixed percentage fee for fund management. You should know the exact percentage of this fee.

3. Lock-in period:

Some schemes have time limit to withdraw money which you should keep in mind.

4. Long Term Perspective:

In mutual funds, the maximum profit is obtained in the long term.

A guide to becoming an investor with features of mutual funds:

1. Tax-Free Profit:

Some schemes like ELSS also give you the facility to save tax. So you become the owner of hundred percent profit.

2. Best way to increase wealth:

Equity funds can increase wealth with high returns in the long run.

3. Best for Beginners:

New investors can easily start through SIP, so that their money is invested in a systematic place in the market thereby reducing their risk.

Summary: Why invest in mutual funds?

Investing in mutual funds offers lower risk with higher returns. It offers professional management, diversification, and tax avoidance. One can start with a small amount with SIP. It is the best tool for long-term wealth growth, providing an easy and safe way to achieve your financial goals.