Mutual funds are investing instruments that pool money from multiple investors to purchase securities, managed by professionals called mutual fund managers with investing expertise. The mutual fund manager buys and sells securities on behalf of the fund’s investors. In a way, a mutual fund is quite similar to a smallcase investment. The mutual fund manager conducts research on different securities and markets and uses their expertise and knowledge to make informed investment decisions.
However, there is already a high chance that you knew about this, so let’s further expand and look at 10 amazing things about mutual funds that you probably didn’t know about. So here are 10 things you probably didn’t know about mutual funds in India.
- Mutual funds are diversified, meaning they hold a variety of different types of securities, such as stocks, bonds, and cash. This diversification helps to spread out the risk among the different investments in the fund, which can make the fund less risky overall. So, as an inventor you invest in that mutual fund that suits your risk appetite. If you are an investor with a high risk appetite, you can invest in equity funds, while if you are a risk-averse investor, you can invest in debt funds. Lastly, you even have hybrid funds that invest in both debt and equity.
- It’s important to note that mutual funds have different investment objectives and strategies, so the specific role of the mutual fund manager will vary depending on the fund. For example, a mutual manager for a stock fund will focus on selecting individual stocks to include in the fund, while a mutual fund manager for a bond fund will focus on selecting bonds to include in the fund.
- Having professional mutual fund managers managing your mutual fund is a big advantage, as they have access to research, tools, and information that the individual investors may not have. They also have the experience and knowledge to make good investment decisions, which can help to increase the return on the investment and reduce risk.
- Mutual funds offer both growth and income, which can make them suitable for different types of investors. Growth funds invest in stocks and aim to provide capital appreciation, while income funds invest in bonds and other fixed-income securities and aim to provide regular income.
- Mutual funds in India offer two main approaches to investing: lump-sum and systematic investment plan (SIP). A lump-sum investment is a one-time investment of a certain amount of money, while an SIP allows you to invest a fixed amount of money at regular intervals (such as monthly). SIP is a more popular approach among retail investors in India, as it allows them to invest small amounts of money at regular intervals, regardless of the market conditions. This approach can be beneficial for investors who have limited funds and want to invest over a period of time
- Thanks to the SIP system, mutual funds in India have a low minimum investment requirement, with many funds allowing you to invest with as little as Rs. 500 or even less, making them accessible to a wide range of investors in India. This low minimum investment requirement means that you can start investing with a small amount of money and grow your investment over time. It’s worth noting that the minimum investment amount may vary from one mutual fund to another.
- In India, mutual funds can be actively managed or passively managed (index funds). Actively managed funds are managed by portfolio managers who try to beat the market by selecting the best investments. These funds have a higher expense ratio as the fund manager spends more time and resources to research and select the best investments.
- On the other hand, passively managed funds, also known as index funds, aim to track the performance of a particular market index, such as the Nifty 50 or the BSE Sensex. These funds have a lower expense ratio as they just replicate the portfolio of the index they track.
- When you invest in a mutual fund you are relieved from the responsibility of actively tracking the market. The fund manager is responsible for managing your investments. They also monitor the fund’s performance and make adjustments as necessary to ensure that the fund is on track to meet its investment objectives.
- Lastly, you can invest in a smallcase or a mutual fund using an online stock trading app like Kotak Securities. You can do it with the tips of your fingers, whether you want to start an SIP in the mutual fund or want to invest lumpsum.