All-in-One Mutual Fund Solution

What is a Mutual Fund?

A Mutual Fund is an investment fund that is managed professionally and which collects funds from various investors to invest in stocks, bonds, or other securities. Mutual funds are managed by skilled fund managers with the objective of generating returns according to the objective of the fund. Mutual funds are segregated into various categories, including equity funds, debt funds, hybrid funds, and index funds, based on their investment approach.

Sample: If a mutual fund gets ₹10,000 each from 1,000 investors, the pool thus formed is worth ₹1 crore. The manager of the fund then invests this money in different stocks and bonds depending upon market conditions as well as objectives of investment.

How to Invest in Mutual Funds?

Investing in mutual funds is easy and organized. This is how you can begin:

• Select Your Investment Objective: Identify whether you are investing for creating wealth, saving taxes, retirement, or education.
• Select the Suitable Fund Type: Depending on risk tolerance, select equity funds (high risk), debt funds (low risk), or hybrid funds (medium risk).
• Choose Between SIP or Lump Sum: SIP (Systematic Investment Plan) facilitates monthly investment, whereas lump sum is a single payment.
• Register on KYC: Provide PAN, Aadhaar, and bank information to a mutual fund platform.
• Invest Through a Broker or Direct Plan: Mutual funds can be selected by investors through mutual fund websites, apps, brokers, or banks.
• Monitor & Keep Track of Your Investment: Periodically check fund performance and redeem units when necessary.

Illustration: If you invest ₹5,000 a month in a 12% returning equity mutual fund SIP for 10 years, your investment value becomes around ₹11.6 lakh, while the total investment amount will be only ₹6 lakh.

How to select a good mutual fund to invest in?

To choose a good mutual fund:

• Firstly, determine your investment objective—either for short-term income, long-term appreciation, or tax sheltering.
• Next, examine your tolerance for risk and pick the funds suitably: equity funds for better returns, debt funds for safety, and hybrid funds for the best of both worlds.
• Monitor the fund's historical performance relative to its benchmark and category average, with consistency being the key.
• Review the fund manager's past performance and tenure. Look at the cost ratio, since lower costs translate to higher net returns with you.
• Study the portfolio holdings of the fund for diversification and risk management.
• Have a look at AUM (Assets Under Management) to make sure that it's stable but not too high in the case of small-cap funds.
• Watch out for exit loads and lock-in periods, particularly in tax-saving ELSS schemes.
• Lastly, compare tax efficiency depending on your holding period.

Choosing a mutual fund by these criteria guarantees compatibility with your financial goals and well-managed risks.

Mutual Fund Terms & Explanations

• Expense Ratio: The yearly charge by mutual funds for investment management. Lower expense ratios (usually 0.5% to 2.5%) translate to greater returns for investors.
• Lump Sum Investment: One-time investment of a bulk sum in mutual funds, appropriate for individuals having plenty of capital and market understanding.
• Systematic Investment Plan (SIP): A technique for investing fixed small amounts periodically, lowering the risk of market fluctuations through rupee cost averaging.

Example: If the NAV (Net Asset Value) of a mutual fund is ₹100 and the expense ratio is 1.5%, then ₹1.50 per ₹100 investment is utilized for fund management charges.