What is Mutual Fund? How to Invest in Mutual Funds? Types & Benefits

What is Mutual Fund? How to Invest in Mutual Funds? Types & Benefits

If you are a beginner and don’t know where to start, mutual funds are the way to go. It is an investment option where many people are pooled together to invest in a variety of stocks, bonds, or other securities. It has gained immense popularity in recent times. It is a great investment instrument. It comprises different investment options like shares, bonds, or, in some cases, both merged as a single product. 

This blog breaks down mutual funds meaning, types, benefits, and how to invest in mutual funds. 

What is Mutual Funds? 

Mutual funds are a type of investment where people put money together to purchase different types of securities like bonds, stock, and other securities in the money market. The assets are operated and managed by investment experts. They aim to generate decent returns for the investment. The mutual funds investment is regulated by SEBI (Securities Exchange Board of India). If you are looking to invest in mutual funds, you can contact Aaditya Wealthon. We are the best broker in share market in India that helps you diversify your investment profile and earn high returns. 

When you invest in mutual funds, your money is diversified across different instruments. This reduces the risk as compared to putting all your funds in just a specific bond or stock. The ROI depends how the performance of mutual funds, deducting the charges.

Different Types of Mutual Funds

There are various types of mutual funds available in India for different investors with varying needs and risk tolerance. 

Here are 5 Types of Mutual Funds:

  • Equity Funds: Funds that are primarily invested in shares of companies for long-term capital appreciation. These funds are based on market capitalization viz large cap, mid cap, and small-cap, thematic investment, and sector focus. 

  • Hybrid Funds: Hybrid funds or balanced funds are a blend of debt and equity instruments to strike the right balance between growth and revenue. 

  • Tax-Saving Fund: ELSS (Equity-Linked Savings Schemes) provides tax benefits under Section 80C of the Income Tax Act. 

  • Debt-Funds: These funds are investments in fixed-income securities such as corporate debts, government bonds, and others. 

  • Index Funds: These funds are aimed to replicate the specific stock market index like Sensex or Nifty50. 

Categories of Mutual Funds

Mutual funds basically fall under two categories based on entry and exit restrictions:

  • Open-Ended: In this, investors can purchase and sell units at any time, 

  • Close-Ended: These funds provide investors with units only in the initial period.

What Are the Mutual Funds Benefits?

There are various Mutual funds benefits. Here the some of them:

  • Begin with a tiny amount: You can start with a small amount of money. 

  • Diversification of Funds: With funds spread across different assets, it reduces risk, so other assets balance the poor performance of one investment. 

  • Different Types of Offerings: Mutual funds offer a variety of investment options that cater to different investment needs and risk profiles. 

  • Security: Mutual funds are governed by SEBI, so investors can be at peace that their money is in safe hands. 

How to Invest in Mutual Funds?

Investment in mutual funds is a simple process: 

  • Choose a Platform: You can take the help of a stockbroker like Aaditya Wealthon. We are a proud member of AngelOne, a trading platform. We can help you pick the best mutual funds investment. 

  • Select the Right Fund: Every person has a different mutual funds investment objective in India. Choose the fund that aligns with your risk tolerance and financial goals. 

  • Investment Amount: Decide the amount you wish to invest and pay online. 

  • Track and Manage: Monitor your investment, check the performance, and if needed, make changes. 

What Documents Do You Need to Invest in Mutual Funds? 

Identity Proof: Voter ID, Aadhar Card, Passport, driving license, or any other valid identity card recognized by the Government of India. 

Address Proof: Any above-mentioned documents, Bank account statement, electricity or gas bill. 

KYC Compliance: Your PAN must be verified under KYC (Know Your Customer) norms. 

Conclusion 

Mutual funds are an amazing way to invest in the stock market with the need to have a deep knowledge of the share market. With different types of mutual fund options to invest in, every person gets to choose something that aligns with their financial goals. So, if you are looking to invest in mutual funds, contact

Types of Mutual Funds

today. 

Also Read: Which Kind of Debt Mutual Fund is the Most Valuable?

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