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Know About Mutual Fund Investment

05 Jan 2023

Mutual funds may have emerged as a popular investment avenue, and you, the investor, may discover that many individuals around you are choosing this investment path. However, before you get on the bandwagon of investment, you have to know how to invest in mutual funds and what this form of investment involves. Like most other channels of investment, you can invest in mutual funds online, and be rest assured that this kind of investment offers a broad investment scope. Irrespective of your investment, or appetite for risk as an investor, mutual funds can permit you to invest with ease. 

  • What Mutual Funds Are

You can buy mutual funds online, like most other investments, but you should know how they work. A mutual fund is essentially a fund that contains wealth that is pooled from several investors. This wealth that forms a corpus of sorts, is then used to invest in bonds, equities, and any other financial assets. A fund manager is responsible for managing a mutual fund, and this is a professional financial expert who has the skillset to know which assets may yield good returns. The investment goal of any mutual fund decides the types of securities the pooled funds are invested in. For example, a mutual fund’s target may be the generation of wealth in the long term. Therefore, the fund would invest in stocks of large  and stable firms. These are called large-cap funds. If you want diversity in your investment, mutual funds can offer you investments that fulfil your needs. 

  • Purchase Mutual Funds Online - Know the Types

Before you go ahead and dive in to buy mutual funds online, you should know the major types available to invest. Listed below is the nature of mutual fund types: 

Debt Funds - Mutual fund investments that come under this category are typically income funds. The motive behind these is the preservation of wealth/capital. Essentially, debt funds earn profit by the investment of fixed instruments such as bonds, government securities and debentures. This fund can guarantee a steady income return as the assets are stable instruments. 

Equity Funds - These are growth funds and when you buy mutual funds online, you will see that equity funds primarily invest in the equity market. The main aim, here, is the appreciation of capital. These are risky funds, but held for the long run, you can expect high rates of return. 

Tax-Saving Funds - Also known as ELSS, these funds help you to save tax and plan your tax accordingly. If you invest up to Rs. 1.5 lakhs, you get tax deduction benefits. Nonetheless, this comes with the condition of a lock-in period of 3 years, so may be considered better for long term investing. 

Retirement Funds - Mainly pension-oriented funds, these work with the objective of collecting wealth which proves sufficient in providing a regular income (a pension) to investors after they retire. These funds have lock-in periods of at least 5 years. 

  • Mutual Funds as Investments

You can invest in mutual funds through banks, like those offered by SBI, for instance. Invest online in SBI mutual funds through the bank’s mutual fund department. Alternatively, you can open an account with brokers like Motilal Oswal, who will advise you on the best funds to fit your specific financial goals.

Related Blogs: How to Analyse Mutual Funds for Big Returns | Things to Know Before Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account

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