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What is mutual fund.

All about Mutual Fund 

  Meaning :

                  Mutual fund is a way to invest money in stock market,debt-fund,gold and estate through an intermediary . It is actually a pool of money which collected from different-diffrent investors

 Who is intermediary:

                              There is too much mutual fund companies(like SBI-mutual fund,ICICI-PRU) in market who take your money and invest in stock,debt-fund and commodities. 

 How mutual fund works:

                             Firstly mutual fund companies make a asset management company (amc company like HDFC AMC,ICICI PRU etc) and after they launches a fund or scheme and after that they advertise that scheme for raising fund from public to invest in stock market. Peoples who interested in that scheme invest money in that fund,these collected amount is called asset under management(AUM). after that fund manager of that scheme makes strategy about where to invest money and after making stretegy he invest money.

Types of mutual fund schemes: 

                               There is two type of schemes of mutual fund :

       Basis of plan: 

                       Direct Plan :Direct funds are those mutual fund schemes that are directly offered by the fund house or AMC. The names of these funds are prefixed by the word ‘direct’. There is no involvement of a third party, distributor, or agent. The investors directly deal with the AMC offering the fund. 

                       Regular plan : Regular plan is what you buy from an advisor/broker/distributor. In case of a regular plan, the mutual fund company pays commission to the intermediary. 

      Basis of income and type of investment:                                                

  •        * Equity funds
  •        *Debt funds.
  •        *Money market funds.
  •        *Index funds.
  •        *Balanced funds.
  •        *Income funds
  •       *Fund of funds.
  •        *Specialty funds.

  •  Advantages of mutual fund:
  •                       By investment in mutual fund you can diversify your money even if you have a small amount because it is a pooled fund so fund manager can invest your money in expensive stocks . In it an expert manages your money in cheap commission ,and expense ratio is very low because of a large consumer chain.   
  •             Investment through systematic investment plan(sip):
  •                      SIP is a biggest advantage of mutual fund . SIP is an investment vehicle offered by many mutual funds to investors, allowing them to invest small amounts periodically instead of lump sums. The frequency of investment is usually weekly, monthly or quarterly.if you have no money then sip bounces but it is not like check bounce and no extra fee will charge.

  •                                                         

  •  Disadvantage of mutual fund: 
  •                                                              Fluctuating returns: Mutual funds do not offer fixed guaranteed returns in that you should always be prepared for any eventuality including depreciation in the value of your mutual fund. In other words, mutual funds entail a wide range of price fluctuations. Professional management of a fund by a team of experts does not insulate you from bad performance of your fund.
  •                                                     greediness: most of the people withdraw their money in time of great fall due to fear but that time is best for investment.

  • How to invest in mutual fund:
  •                   To start a mutual fund investment, you need to open an account with fund houses and they also have their mobile app. The next step is to create a mutual fund portfolio which many investors find tough. First, shortlist a few schemes with credible long-term performance record.  
Best fund as per my opinion to invest:
          
                     For tax relief: Aditya birla tax relief 96 fund

                   large cap fund: Axis blue-chip fund ( expense ratio is very low)  

                   multi cap fund: Parag parikh long term equity fund(international exposure and value investing)

                   small cap fund: Axis small-cap fund

                                                                                 * i hope by now you have learned a lot about mutual fund *
      by: yash vishnoi (ca-inter)                    
                   

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