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Basics for Mutual Fund Investment

A Mutual Fund is a vehicle in which investors pool their money to earn returns over a period of time . These funds  are managed by fund managers of the respective schemes. It is the duty of fund manager to invest this money in stocks, bonds and other instruments and seek to provide good returns.

Why invest in Mutual Funds

Professional Fund Manager  -Investment in mutual funds required some skills. You need to research the market and analyse the best options available. But if you don't have the skill and time for research and analysation, investing in mutual funds can be an excellent alternative. Here, a professional fund manager takes care of your investments and strives hard to provide reasonable returns.

Returns-Mutual Fund give better returns instead of traditional method of investments give assured returns. this is because returns on mutual funds relate the the market's performance.

Diversification-When you invest your money in a single asset, you could risk a loss when market crashes. You can avoid this problem by investing in different asset classes and  diversifying your portfolio.

Tax Benefits-Investors can claim a tax deduction upto Rs. 1.5 lacs by investing in Equity linked Investment Schemes(ELSS). The tax benefit is available under 80C of Income Tax Act. ELSS comes with a lock in period of 3 years. When you invest in ELSS Funds, you can only withdraw your money after the lock in period ends.

What are different types of Mutual Funds

  • Debt Funds- Debts funds invest in government securities and corporate bonds
  • Equity Funds-Invest your money in stocks
  • Hybrid Funds-What if you invest in equity as well as debt

Funds based on structure

  • Open Ended Mutual Fund Scheme-where an investor can invest on any business day. These funds bought and sold on their Net Asset Value(NAV).
  • Close Ended Mutual Fund Scheme-there is predefined maturity period. Investor can invest in these funds when they launched and can withdraw their money at the time of maturity.

How to invest lump sum

Lump sum investments also known as on time investment is investing your entire amount in one go. it is the simplest method of investing.

How to invest for tax saving

Investments in Equity Linked Saving Schemes (ELSS) qualify for deduction from your taxable income under Section 80C of income Tax Act, Units of ELSS are locked in for 3 years from the investment, you can't redeem your units during the lock in period.

What is Systematic Investment Plan (SIP)

One of the best feature of investing in mutual funds is through SIP, you can invest tiny amount most of the fund houses allowed Rs. 1000  per month through SIP. Now this might seem like a tiny amount to begin your investment journey, but when you invest consistently over a considerable period, you can achieve a substantial sum.

Frequently asked questions

Can I withdraw SIP any time?

Most mutual fund schemes are open ended and can be redeemed at anytime. it mostly charge exit load upto a year after which there are no loads on redemption

Which SIP is more beneficial?

there are many options daily. quarterly and monthly, it depends upon your risk tolerance you can choose the best investment plan for you.


Final Thoughts

Investing in mutual funds is one of the simplest ways to achieve your financial goals on time. But before investing in mutual funds lot of research and analysation is required. You don't have to invest because your colleague or friend invested in it. Identify your goals and inves accordingly. you can approach a financial advisor to help you make the right investment decisions and plan your financial journey


CS Shweta Jain
Certified Mutual Fund Advisor


Disclaimer: All mutual funds are subject to market risk, please read scheme related documents carefully.

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