Understand Mutual Funds Before You Regret It

Understand Mutual Funds Before You Regret It

In today’s digital age, most of the information we want is available at our fingertips. Hence, this gives many people access to knowledge that was hard to acquire a few years ago. This factor has found its way into the world of investments as well and people have more access to quality  videos, articles and material than ever before. Thus, many Indians have started investing their money into stocks without any formal financial advisory. Yet, this habit could backfire if you do not keep yourself updated about the markets and continuously do your research on a regular basis.

What is a mutual fund?

This is where a mutual fund comes in. A mutual fund is a financial instrument that collects a pool of money from various investors and invests them in securities like stocks, money market, bonds, etc. The instruments invested in depends on the type of mutual fund. For instance, an Equity mutual fund would generally invest in stocks. A fund manager oversees where the money is invested and has a team that continually researches the instruments invested in. This mode of investment is ideal for someone that does not have the time to track the markets and leaves it to the experts to do the same.

Types of Mutual Funds

If one were to look at mutual funds from an asset class perspective, these are some of the types of mutual funds:

1. Equity Mutual Funds
2. Debt Mutual Funds
3. Money Market Funds
4. Balanced Funds
5. Index Funds

You can find other types of mutual funds too, such as specialty funds, fund of funds, etc. There are varying risk degrees and sub-categories within these types. You can learn more about the same here.

How to begin investing in Mutual Funds?

For most investment beginners who are salaried professionals, the ideal way to invest in mutual funds is through a Systematic Investment Plan (SIP). An SIP investment ensures that you are investing a part of your salary/income every month in a disciplined manner. In the long run, this helps tide over market volatility by averaging out your buying price. As with most decisions in life, it is better to learn about mutual funds as early as possible and begin your journey because this gives you the benefit of the power of compounding. It is ideal to make your demat account on a trusted platform first and then begin your investment journey.

Conclusion

As you have learned above, you can take advantage of the research done by top fund managers and start your investment journey online with a few clicks of the mouse. Apart from this, it is also prudent to have a financial advisor take a look at your portfolio on a regular basis so that you can invest in the best mutual funds in the market. This also helps with reshuffling your portfolio every few months in order to make the most of evolving market conditions.

Related Aritcles:

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 | Upcoming IPO | LIC IPO

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