Mutual Funds: A Beginner’s Guide for Understand

Mutual Funds: In this article for beginners about mutual funds, we have selected some articles that will help you absorb about mutual funds and get started with them. We advise bookmarking this sheet so you can read these articles at your own pace.

Table of Contents

• What are Mutual Funds?
• How to start investing in mutual fund schemes?
• Types of Mutual Funds
• Returns in Fixed Deposit vs Returns in Mutual Funds
• Fixed Deposit or Mutual Fund: Which is better?
• Benefits of investing in mutual funds
• How to invest in mutual funds?
• Team Conclusion
• FAQs

What are Mutual Funds?

Mutual fund is an investment platform that pools funds from multiple investors and invests these funds in multiple financial securities such as bonds, stocks, shares, money market instruments, gold, etc.

MF are run by investment specialists who allocate these funds to generate income or capital gains for investors. Small or individual investors have access to professionally managed portfolios of stocks, bonds and other securities through MF. As a result, each shareholder contributes equally in the profits or losses of the fund.

How to start investing in mutual fund schemes?

Now investing in mutual funds has become so easy and simple that one can think of investing in multiple funds without additional documents. Investors investing in MF for the first time will have to complete their KYC which is a one-time process.  You can visit a distributor or investment advisor to help you complete the KYC verification or you can do e-KYC online.

The choice between investing directly or through a distributor is a personal one. If you prefer to manage your investments yourself, you can of course invest online through the fund’s website or through an online platform. But if you want advice or need help investing, you can invest through a representative, such as a distributor, investment advisor, bank, etc.

Types of Mutual Funds

Here you can easily read and learn the some important types of MF.

Equity Funds:

These funds invest in the stock market. Their objective is to achieve capital appreciation over the long term. There is high risk and potential for high returns.

Debt Funds:

These funds invest in bonds, government securities and other debt instruments. Provide stable and safe returns, but the returns are relatively low.

Hybrid Funds:

These funds invest in both equity and debt. These have medium risk and medium return potential.

Money Market Funds:

These funds invest in short-term investment instruments, such as treasury bills and commercial paper. Their objective is to provide liquidity and preserve capital.

Returns in Fixed Deposit vs Returns in Mutual Funds

Now you will see the returns comparison between FD & MF. And it will be very effective for your choosing option in both.

Returns in Mutual Funds

Generally, the rate of return in MF is higher than that of fixed deposits. This is because mutual funds invest in market-related investments such as equity and debt funds. In MF, the funds are efficiently managed by professional fund managers and they invest the fund money, and they have only one objective – higher returns and higher investments.

Returns in Fixed Deposit

Fixed deposits come with guaranteed returns. The money deposited by you in planned banks is protected by DICGC up to Rs 5 lakh. Insurance is given. In any FD schemes, FD rates are fixed at the time of booking the FD and remain the same till the end of the FD tenure.

Fixed Deposit or Mutual Fund: Which is better?

Selecting between these two options requires thorough analysis, as well as an understanding of risk-return. Mutual funds come with a good mix of risk-return. FDs help in striking the right balance in one’s portfolio as they do not carry any significant risk.

Benefits of investing in mutual funds:

Ok now we are ready for know the top benefits from MF investment.

Professional Management:

Investors’ money is managed by professional fund managers who have extensive investment knowledge and experience.

Diversification:

MF invest across different asset classes and industries, thereby reducing risk.

Liquidity:

Money invested in mutual funds can be easily sold and withdrawn.

Small Investment:

Investing in mutual funds can also be started through small investments, making it accessible to ordinary investors.

How to invest in mutual funds?

It is very important part for beginners for knowledge purpose because new investor do not know the process. So, here we are describing the process for entering in the mutual funds market.

Identify your financial goals:

Evaluate your financial goals, time horizon and risk tolerance before investing.

Select Fund:

Study the performance, risk and management fees of different MF and select the right fund as per your goals.

Contact:

Start the investment process through a mutual fund company or distributor.

Invest regularly:

Invest in mutual funds at regular intervals through regular investments (SIP), which helps in wealth accumulation.

Team Conclusion

MF offer diversified investment opportunities personalized to changing risk hungers and financial goals. They provide access to professional management and a wide range of asset classes, making them suitable for both beginner and experienced investors.

By sharing resources from multiple investors, they spread risk and potentially enhance returns. However, investors should carefully assess their objectives, risk tolerance, and fees associated with each fund. Regular review and adjustment of investments ensure position with changing financial circumstances and market conditions. Overall, MF remain a useful tool for wealth accumulation and financial planning when chosen wisely and monitored regularly.

FAQs