How Can I Invest in a Mutual Fund

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What Is a Mutual Fund and How Do I Invest in One

20 Jun 2023

Mutual funds represent investment instruments that pool wealth from an investor group to buy a range of securities. Mutual fund investment offers an avenue to invest in several financial securities. When you purchase a single unit contained within any mutual fund, you in fact own a stake in each of the investments that are composed of the whole fund. Several mutual funds are perfect investment choices given the ease of their use, plus the perks they offer.

By means of mutual fund investment, you can invest in a diversified range of assets like commodities, cash, debt, equity and more. Allocating part of your wealth to a mutual fund is a good way to promote financial diversification of your investment portfolio, as mutual funds pool together a collection of assets and give you returns according to the performance of the whole pool. Hence, you may well gain returns with a lesser degree of risk as, among a fund of, say, five different stocks, a few may underperform, but the rest perform well and make up for loss.

Mutual Funds in India

Several kinds of mutual funds are available for investment in India, and if you are considering mutual fund investment, it is prudent to have the following aspects in mind which will shed some more light on what these investment products are:

Different Funds, Varied Goals - Based on your financial objectives, you get several types of funds. As far as the structure of any given fund is concerned, you may get open-ended, interval and closed-ended funds. Regarding portfolio management, you can opt for actively managed funds and passively managed funds. Furthermore, asset classes that you can invest in with mutual funds include debt, equity, gold, fixed income and a lot more.

Planning Ahead - Mutual funds can be picked to match distinctive planning requirements. For instance, funds which are based on debt, like Liquid Mutual Funds, help you to grow a robust emergency fund. Likewise, equity-based funds help beat inflation and construct a solid corpus for retirement.

Regularity in Investment - In any given mutual fund investment, you are able to regularly invest through a Systematic Investment Plan, or SIP. The best mutual funds for SIP aid in building compounded returns/gains for the long term. Another way that regularity comes into the picture regarding mutual fund investment is by the ability to invest lump sums. You can also invest in instalments, based on your own financial convenience.

How to Invest in Mutual Funds

Whether you invest in debt mutual funds or any other, the way to invest is the same for any mutual fund. You can either choose to invest in a mutual fund product through any bank that has an investment division, or better yet, opt for investment with a great brokerage firm like Motilal Oswal. It is also possible to invest in mutual funds online. In case you are investing in person, you may have to meet a fund manager who will make you fill out an application form with relevant details and discuss the funds available to invest in. You will have to submit your KYC details too, as this is a mandatory requirement for any investment. However, most mutual funds to invest in are sought online and the process of investing is done online too. Here are the general steps:

Sign up for an account that gives you access to choose mutual funds online.
Go through the process of completing your KYC formalities.
Identify any funds you wish to invest in and fill in an application form.
Select any given fund and transfer any amount to invest to the fund account.
In case you wish to invest through a SIP on a monthly basis, you can give your brokerage or bank standing instructions to do so.

Invest with Care

If you wish to invest in mutual funds, you should first find out what funds are available with the broker you wish to invest these funds with. Doing a bit of homework regarding the companies of the stocks in a fund can help. While you are exploring mutual funds for investment, you can open a Demat account and consider other fruitful ways to allocate your wealth too.

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Can I pause my investments in an SIP?

What are the Benefits of Commodity Trading?

On opening a commodity trading account linked to a Demat account, you can get a load of benefits when you engage in this kind of trading. Commodity trading is a super channel for any investor who wants to hike up their pool of finances. Below mentioned, are some of the advantages of commodity trading whether trading commodities on the MCX or any other exchange:

Diversification

For a financial portfolio to be balanced, weighing potential risks, it has to be diversified in a way that assets are allocated equally. Commodity trading is a perfect way to diversify asset allocation, reducing the risk factor in a portfolio.

Reduced Manipulation

The stock market and exchanges are typically regulated by price shifts that are global in nature. This eliminates the risk of any manipulation in price that may occur internally.

Inflation Hedge

The prices of commodities can prove to be a safeguard against inflation. In contrast to any other investment instrument, commodity prices move in a way that is the same as inflation. This is because inflation is the result of high prices of commodities in the first place. Hence, commodity prices can be predictable in a sense. Furthermore, the prices of commodities are bound to rise during high inflation periods in the nation and profits may be earned thereof.

What are capital bonds?

Capital bonds, also known as 54EC bonds, are debt instruments that give you a fixed return on your investment. If you sell a house property and earn capital gains thereon, you can enjoy tax exemption by investing in these bonds. When you invest in a capital bond, you get to earn interest at a fixed rate. The interest is calculated on the face value of the bond. And it is paid out at regular intervals. Once the bond matures, you will have to redeem the instrument.

Sectorial performance question

How do I Invest in capital gain bonds?

Capital gain bonds are issued by REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) and NHAI (National Highways Authority of India) and IRFC (Indian Railways Finance Corporation Limited). They are not listed on any exchange. So, if you want to invest in capital bonds, you will have to buy them directly from the issuer - either in the physical form or in the demat form. You can invest up to Rs. 50 lakh in these bonds.

What are the different types of mutual funds in India?

How do mutual funds work?

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