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Mutual Fund – A Better Way of Investment

What is Mutual Fund??

Mutual Fund collects money from different people like us. For example; Rs. 1000 from me, Rs. 1000 from you and creates a money pool. A Fund Manager then uses this pool to invest in stocks, bonds, gold and other assets and seek to provide potential returns. We don’t have to worry about where it is being invested because the professional & expert Fund Managers takes care of it.

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The gains (or losses) on the investment are shared collectively by the investors in proportion to their contribution to the fund. One of the biggest advantages mutual funds give you is that of immediate diversification.  If you want to invest Long Term, Mutual Funds is a great option because – when you save, your money sits idle, but when you invest, your money multiplies and instead of sitting idle, your money will grow and start earning for you.

Why Should You Invest in Mutual Funds?

We all save money but then a question comes to our mind what do i do with the money? How can I get the maximum benefit out of it? After all every one of us work really hard for earning it. When we ask our friends where to invest? Well some will say fixed deposits some say buy an insurance policy but are these the best options we have? We know inflation touching the roof so the important question is to ask ourselves, that those investment option can really beat the inflation? Answer is NO!

Mutual funds trust me is the answer for you. But i know, when you hear about this mutual funds it sounds very complicated isn’t it? You might think about filling big & complicated forms, reading boring brochures, going through complex calculations, stock markets analysis and what not. It’s obvious to think that its simply not everyone’s cup of tea right? But relax, that is where mutual fund experts comes in. Like most investors you may have more interesting things to do in life, like say going to a movie or a weekend trip so leaving investments to the experts is a practical and logical idea after all as they are the experts.

Benefits of investing in Mutual Funds:

1. Diversification

Mutual Funds provide the right diversification for your investments. As you know that stock markets have ups and downs, there is no escape from that fact. But to reduce this imminent risk the asset management company (AMC) does a very smart thing as they go and invest in not one but various instruments like equities and various securities in debt. You may have heard the saying: Don’t put all your eggs in one basket.

This is a famous mantra to remember when you invest your money. When you invest only in a single asset, you could risk a loss if the market crashes. However, you can avoid this problem by investing in different asset classes and diversifying your portfolio.

2. Professional Expertise with Low Charges

Mutual fund accounts are managed by qualified and expert professionals. So it doesn’t require the investors to do all the research and asset allocation. These professionals invest only after careful analysis of the performance and prospects of different companies. Asset Management Companies (AMCs) provide qualified fund managers who, with the help of strong research teams and their own expertise, pick the best options to meet the fund’s objective.

3. Easy Liquidity

Mutual funds offer the convenience of liquidity this means that you can get access to your money very easily and at short notice all it takes is a withdrawal request. It is almost like keeping your money in your existing bank account. The only difference is that, your money has a better chance to grow in a mutual fund. Investments in open-ended funds can be redeemed in part or as a whole any time to receive the current value of the units.

4. Well Regulated

Mutual Funds are well regulated by Securities and Exchange Board of India (SEBI) which means that it is always under the Hawk eye of SEBI so,there is very less chance of fraud. All mutual funds are required to follow transparent processes, as laid down by SEBI, protecting the interest of investors.

Mutual fund is for Everyone:

People think that mutual funds are for those who make a lot of money but this is just a myth.There are mutual fund investments for the college going students to the person about to retire so no matter how much you earn or what your risk appetite is there is a plan for all of us. You could invest in low-risk products like cash and liquid funds which have potentially steady returns or invest in high-risk product like equity funds with potentially high returns.

What are different types of Mutual Funds?

When you wants to buy a car, you know there are various type of options available in the market. There are hatchbacks, sedans, SUV’s, MUV’s and even a sports car. But as you know, every car as per its type serves a different purpose and different customer segment as well. So when you decided to buy a car you buy it as per you need and purpose. For example, for everyday use with a small family a person may prefer a hatchback but an adventurous person with a big family will go for a SUV. In a same way, there are different types of mutual funds in India where each type servers different type of customers according to their needs.

What is Systematic Investment Plans (SIP)?

One of the best features about investing in mutual funds is that you don’t need a large amount of money to start investing. Most fund houses in the country allow investors to begin investing with as little as Rs. 500 (some start at Rs. 100) per month through Systematic Investment Plans (SIPs). Now, this might seem like a tiny amount to begin your investment journey, but always remember..

The smaller of actions is always better than the boldest of intentions.

How to invest in Mutual Funds?

These days, investing in mutual funds has become effortless. You can even do it right from your home. Here are the steps you can follow to begin your investment journey:

1. Sign up to create a mutual fund investment account on UpWealth.in

2. Complete your KYC formalities. (if you have not yet done so)

3. Complete your Risk Profile Assessment.

4. Enter the necessary details as required.

5. Choose your Financial Goals.

6. Pan goals & transfer the required amount.

7. You can also create a standing instruction with your bank in case you invest in a SIP each month.

Final Conclusion:

Investing in mutual funds is one of the simplest ways to achieve your financial goals on time. But before you invest, take an adequate amount of time to understand the importance of Goal-based investments in Mutual Funds. With evolution of technology and the emergence of multiple mutual fund houses investing in mutual funds become hassle -free. So, Identify your financial goals and invest accordingly. #HappyInvesting

About author

Rohan Khedkar, Co-founder & Chief Executive Officer (CEO) of UpWealth is a AMFI Certified Mutual Fund Adviser & SEBI Certified Investment Adviser.
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