Mutual Funds
Simply put the money pooled in by a group of investors with a common investment objective is what constitutes a Mutual Fund. The money is then invested in equities, bonds, and other money market instruments by the Funds Manager. The gains generated from a mutual fund is distributed among the investors according to the portion of the holdings they own. This is done by calculating a scheme’s Net Asset Value or NAV.
Mutual funds are the ideal investment instrument for those who lack large sums for investment and yet want to grow their wealth. Also, the investors who do not have the time to research about the market can take advantage of mutual funds.
Benefits of Mutual Funds over Other Investment Options
- They offer better returns than most investment vehicles
- Flexibility to invest in smaller amounts is another benefit of mutual funds.
- The minimum amount of investment is INR 500 and the maximum can go up to as high as the investor wishes to invest.
- Mutual Funds offer flexible withdrawals as the investor can redeem the units at any time.
- Mutual Funds provide the best tax-saving options as ELSS Funds allow the investors to claim an exemption of INR 1.5 Lakh under Section 80C of the Income Tax Act, 1961.
- Investors can choose from a wide variety of schemes as per their risk appetite.
- Since all products of a Mutual Fund have been recognised under the SEBI guidelines, investors can discover the associated risk, therefore, making the process more transparent and secure.
Investment Options
Some of the investment options under the Section 80C are
1.
Based on Risk/Return
Mutual Funds are broadly classified in the following categories as per the risk involved and return expected.
- Debt – Liquid Fund, Money Market, Short Term, Corporate Bond, Dynamic Bond, Credit Risk, Gilt Fund, etc.
- Hybrid – Equity Saving Fund, Multi Asset Fund, Aggressive Hybrid Fund, Conservative Hybrid Fund and Dynamic Asset Allocation Fund.
- Equity – ELSS, Index Funds, Multi Cap, Mid Cap, Small Cap, and Focused Equity.
2.
Open and Close Ended Funds
- Open Ended Funds can be bought and sold at any time of the year. They come with a lock-in period of 3 years, after which you can redeem from the funds.
- Closed Ended Funds can only be purchased only when the subscription window is open. Also, there is a fixed investment period during which you cannot redeem any units.
Why do you need a Mutual Fund Advisor?
When you hire a fund manager, they will take care of the entire pool of money and the taxes. They will help you figure out where to invest, when to invest, and how much to invest. They are the ones strategizing to make your mutual fund scheme a profitable investment.
If you have been looking for the perfect mutual fund advisor that will help you grow your wealth, we have got your back.
