You may have come across the “mutual funds sahi hain” advertisements by the Association of Mutual Funds in India (AMFI) and might be interested to know what mutual funds exact are. Mutual funds are professionally managed funds that not only diversify the risk but also aim to provide consistent long term returns. Mutual funds are available in various types as per the risk appetite and time horizon of the investor. Let us look at five unbelievable facts about mutual funds:

1. Mutual funds are for everyone

Mutual funds are a great instrument for someone who wants to start their investment journey. They are professionally managed by fund managers who are experts in the field and carry out in-depth market research before taking any decision. If you are someone who wants to grow their wealth but lacks the skill or experience of investing in stock markets, mutual funds are for you.

2. Mutual fund investors can begin with 100/-

Mutual funds are a very accessible and affordable financial instrument. An investor can start their journey with as low as 100/-. Mutual funds have enabled young college students and even young working professionals to start their investment journey at an early age. This enables young investors to form a good financial habit and get good returns in the future. One of the popular ways to invest in mutual funds is through Systematic Investment Plans or SIPs.

3. An instrument to save tax

Mutual funds are a great financial instrument to get good returns but they can also help investors save tax. An equity-linked saving scheme or an ELSS mutual fund offers a tax rebate under Section 80C of the Income Tax Act, 1961. With time as an investor’s salary grows, they might want to consider saving more tax. In that case, ELSS schemes can be really helpful. ELSS mutual funds will help investors get good returns over the long term while helping them save tax.

4. Power of compounding - “He who understands it, earns it; he who doesn’t, pays it.” 

A systematic investment plan or a SIP is a great tool for salaried professionals and young investors to start their investment journey. A SIP of just 500/- per month for 30 years at an average CAGR of 12% can get you returns of almost 18 lakhs. Learn more about the power of compounding here and learn why even Albert Einstein called it the “eighth wonder of the world”.

5. Dividend Mutual Funds

Mutual funds are of different types. One such type of mutual fund is the dividend mutual fund.  A dividend mutual fund invests primarily in those stocks that are known to give good consistent dividends. By investing in a dividend mutual fund, an investor gets the dual benefit of constant returns over the long term as well as dividend payouts over the short term.

Conclusion 

Mutual funds are a powerful yet accessible and affordable tool of investment. Through them, you can invest in a variety of asset classes and every individual has a chance to invest in them depending on the risk appetite and time horizon. So what are you waiting for? Open your demat account online today to begin your investment journey.

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