Mutual Fund is a Pool of Funds which is collected from multiple investors and invest in assets such as stocks and Bonds. Mutual funds are managed by Asset Management Companies (AMCs). Each AMC will have their separate Mutual Fund Scheme.
How Mutual funds work?
A Mutual Fund is both investment and an actual company. When a Mutual Fund holder buys a part ownership of a Mutual Fund company and its assets. Here we can say that Mutual fund is a company which involves in the business of investment.
Investors typically earn a return from mutual funds in three ways that are given below-
1.Firstly, income is earned from dividends on stocks and interest on bonds held in the funds portfolio. All of the income which is received from Fund owners, out of which funds are paid in the form of a distribution. It gives choice to investors to either receive a check for distributions or to reinvest the earnings and get more shares.
2.If the fund sells the securities which are increased in price, then it is said that the Fund has a capital gain.
3.If the Fund Holding is increased in price but are not sold by a Fund manager, then you can sell your mutual funds for a profit in the market later.
Why Mutual Funds ?
1.Liquidity- It is unlike other banks fixed deposit, PPf o Insurance Policy. as you can purchase or sell most mutual fund on any business day. 2.Diversification- A mutual Fund gives you diversification and exposure to stocks and bonds at a very low cost, and if you need to buy them directly then in that case you need to invest a much larger sum of money. 3.Low Cost- Expenditure in Mutual Fund is much lower and is expectedly 1.5 to 2.5% of your investment. This amount is paid in the Fund Administration, Fund manager fees and much else. 4.Transparency- Mutual fund is quite Transparent as it is regulated by Securities and Exchange Board of India (SEBI) and their NAV (Net Asset Value). Their Portfolios and other details are disclosed each month and is available in the public Domain, this is how mutual funds are said to be transparent.
How to select a Mutual Fund??
Firstly, a Fund Category is to be chosen and broadly equity funds should be chosen if you are willing to take a high level of risk and if you are investing for more than a period of 5 years. For a moderate risk appetite you can go for hybrid funds. And if you are not willing to take risk then you can choose or stick to debt Funds. It is to be noted here that all types Mutual Funds carries some amount of risk in it including debt Funds.
1.Fund Manager Experience- In this we have to see that since how long fund manager has been in charge and what past track record shows. 2.Portfolio- Then it is to be seen whether mutual funds are getting high returns by investing in a small company.
How to invest in Mutual funds?
So for this you first need to complete KYC (Know your Customer) which is a one time identity verification process. This process includes submission of identity and valid documents such as Aadhar card, PAN card etc. at BIAT consultant all KYCs are conducted on online basis. Once KYC is done then you need to select a mutual fund and then submit a purchase request along with payment. At BIAT consultant, all these work are being done online and keeps you hassle free.