What is Mutual Fund
Have you ever heard of Mutual Funds? If you do not know how Mutual Funds are used, today I will tell you about it. Many people, after hearing about it, make a wrong strike in their minds about Mutual Funds, which is not right to do so. That is why today I thought that the wrong family which is sitting in the minds of you about Mutual Funds, that Mutual Funds is gambling, remove it today and make you aware of its truth.
Earning money from Mutual Funds in time is a very easy and simple way. You do not have to invest thousands of rupees to invest in it. You can also invest in it as a SIP at the rate of only 500 rupees every month. Many people consider Mutual Funds and the share market to be the same, but it is not so at all. Mutual funds and share market are both a part of the market but there is a lot of difference between the two.
Today in this post, we will know what is the difference between these two and after all what is this Mutual Fund and how can we safely invest in it?
It is a fund (collection) in which the money of many investors (investors) is put together mutually. This group of funds is managed to earn the highest possible profits.
In simple language, a lot of people invest money in Mutual Funds, and this fund is made by the investment of those people. Through these funds, the money is collected and invested in different places and it is tried to give maximum profit to the investor. The management of the fund is done by a professional person who is also called a professional fund manager.
The job of a professional fund manager is to look after mutual funds and to make more profit by putting the funds of the fund in the right place. In simple language, its job is to convert the money put by the people into profit.
Mutual Funds are registered under SEBI (Securities and Exchange Board of India) which controls the Financial Market in India. The job of securing investors’ money in the market is done under the supervision of SEBI. SEBI ensures that some company is not cheating people.
Mutual funds have been present in India for a very long time, but even today people know a lot about them. Some time ago, the perception of people was that Mutual Funds are meant only for rich people, but it is not that this perception has changed in today’s time.
In today’s time, Mutual Funds are not only for the rich but any person can invest in Mutual Funds at the rate of 500 ₹ every month. The minimum amount of investment in Mutual Funds is 100 rupees.
History of Mutual Funds in India
The mutual fund industry started in India in 1963, along with the Unit Trust of India (UTI) on India, at the initiative of the Reserve Bank of India (RBI) and the Government of India. Its purpose is to attract small investors to the stock market.
The UTI was formed in 1963 under an Act of Parliament. It was established by the Reserve Bank of India RBI and initially worked under the RBI. In 1978, the UTI was separated from the RBI. The Industrial Development Bank of India (IDBI) got the authority of regulatory and administrative control in place of RBI. And UTI started working under it.
The development of Mutual Fund in India is divided into several stages. For example, the first phase was from 1964 to 1987, in which UTI had a fund of ₹ 6700Cr.
After this, the second phase starts in 1987, the entry of public sector funds started in it. SBI created the first NONUTI mutual fund. The second phase ended in 1993 but by the end of the second phase, AUM i.e. Assets under management increased to ₹ 47004CR more than ₹ 6700Cr. There has been a lot of enthusiasm in mutual funds among investors in this phase.
The third phase started in 1993 which lasted till 2003. In this phase, private sector funds got approval. In this phase, investors have got more options of Mutual Funds. This phase ended in 2003.
The fourth phase started in 2003 which is still going on. In 2003, UTI was divided into two separate phases. First SUUTI and second UTI mutual fund, which used to work as per the rules of SEBI MF. Read the impact of the 2009 economic recession on the whole world. There was a lot of loss of investors in India as well. This makes people trust.
Mutual Funds were reduced a bit, but now slowly this belief has started coming back on track. In 2016, AUM was ₹ 15.63 trillion. Which was the highest ever. The number of investors has already crossed 5 CR and millions of new investors are being added every month. This phase proved to be a golden chance for Mutual Funds.
Types of Mutual Funds
There are many types of mutual funds. We can divide them into 2 categories. The first is the type of Mutual Funds based on the structure and the second the type of Mutual Funds based on the asset.
A) varieties of Mutual Funds betting on the structure
1. Open-ended open-end investment company
In Open-Ended Funds, investors are allowed to sell (Buy) and buy (Sell) funds at any time / anytime. there’s no fixed date or period for getting and selling funds. These funds provide liquidity to the investors and hence are well-liked by the investors.
2. Close-ended Mutual Funds
This type of plan encompasses a fixed maturity period and investors can purchase funds only during the fund period and such Mutual Funds are listed within the share market. After this, they’re also used for trading.
3. Interval Funds (Interval Funds)
This type of Mutual Funds consists of both open-ended funds and closed-ended funds. Facilities of both varieties of funds are provided in it. It allows investors to trade funds at pre-determined intervals. and also the funds will be traded thereon a fixed period.
This is supported by the kind of Mutual Funds that supported the structure, now we are going to speak about what number of Mutual Funds are taken on the premise of assets.
B) forms of Mutual Funds supported Assets
1. Debt Funds
In such funds, the chance to the investor (investor) is incredibly less. Investors invest in Adventures, Government bound and other fixed-income which could be a safe investment, then this fund is for you. If the investor’s earnings are quite 10,000 from the funds then the investor will need to pay tax.
2. Liquid Mutual Funds
Liquid Funds also are safe Mutual Funds to speculate in. These funds invest briefly time instruments (debt instruments). So if you would like to take a position for a brief time then liquid funds will be your choice.
3. Equity funds
Equity Funds = Equity funds are for you if you would like to induce long-term profit. These funds invest within the exchange. Such funds even have risks, but the profit generated from them is way on top of others.
4. market Funds
Such funds provide reasonable returns to investors within the short term. it’s invested in safe places.
5. Balanced Mutual Funds
Equity funds and Debt funds have a mixed benefit in such fund schemes. the cash deposited during this style of Mutual Funds is invested in both Equity Equity and Dept. These forms of funds also give stability to investors and also accelerate the expansion in income.
Apart from these, there are many funds but the foremost used are funds.
Benefits of Mutual Funds
Although there are many fields of Mutual Funds, today I will be able to attempt to provide you with complete information about the important fields.
1. Professional Management
The money you invest in open-end funds is managed by mutual fund experts with their experience and skills. Before investing their money, these people invest within the funds during which they require to speculate or want to speculate, they are doing not invest if they are doing not profit in line with the knowledge raised by them.
2. Diversification (Diversity)
Safe Investment in Share Market the essential mantra of safe investment isn’t to take a position your money in one share/investment trust and distribute it in many places and invest in many shares and mutual funds. Every fund invests money in numerous places. Good funds will be invested not only in other companies but also in other sectors or perhaps in companies of various sizes. which provides maximum protection to the investors.
3. Variety (option)
All types of funds are present within the marketplace for those hoping for higher returns and safe funds for those with high returns and a desire for safe investment. you’ll be able to have any reasonable desire (Ex. Low Risk, High Profit), but some investment firm will certainly be created for you and it’ll fulfill your need.
4. Convenience (Convenience)
You can invest in Mutual Funds very easily and within the same way, you’ll be able to withdraw money from funds. to shop for Mutual Funds you’ve got to open an account in any brokerage company like (Upstox, Zerodha) and if you are doing not want to open an account then you’ll be able to also invest in Mutual Funds from Paytm Money and PhonePe.
5. Affordable (Cheap)
The share rate of huge companies is extremely high. you regularly consider investing money in those companies, but you’re unable to try and do so due to your low budget, but in Mutual Funds, lots of individuals have the cash together / an area, in order that they can make money from big companies together with your money. Invest in shares and you get to make the most of that. Mutual funds are some way for not only big but small investors to speculate in large companies through Mutual Funds.
6. Tax Benefits
To buy or sell the exchange, you have got to pay tax but you may not pay any quiet tax to take a position in Mutual Funds. In some funds, you are doing not need to pay any tax on your Profit a few times. The absence of tax is additionally a reason for its popularity.
Before investing in Mutual Funds, collect all the information related to the Funds because you will be responsible for any damage caused by it.