The Ultimate Deal On WHAT ARE MUTUAL FUNDS AND INVEST,A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for managing the money. Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.
The Ultimate Deal On WHAT ARE MUTUAL FUNDS AND INVEST,These schemes invest directly in stocks. These schemes can give superior returns but can be risky in the short-term as their fortunes depend on how the stock market performs. Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes. There are 10 different types of equity schemes.
The Ultimate Deal On WHAT ARE MUTUAL FUNDS AND INVEST,To invest in a Mutual Fund, you need to understand the types of Mutual Funds that are available to you. These include:
Equity: These are funds that invest exclusively in the stocks of domestic companies listed on stock exchanges. These are categorised as high-risk funds.
Money market: These are mainly meant for investors looking for easy liquidity and returns in the short-term. These funds invest in money market instruments such as Treasury bills (T-Bills), Commercial Papers (CPs), Repurchase Agreements (Repo) and government securities. These are categorized as low-risk funds.
Debt: These are funds that are considered as an alternative to Fixed Deposits. These funds invest in fixed-income securities. Debt funds are typically low-risk funds.
The Ultimate Deal On WHAT ARE MUTUAL FUNDS AND INVEST
The Ultimate Deal On WHAT ARE MUTUAL FUNDS AND INVEST,Your asset allocation should have a healthy mix of high-risk and low-risk components. The usual rule is that the percentage of funds you allocate to low-risk debt instruments should be equal to your age. For instance, if you are a 30-year-old, then 30% of your fund allocation should go toward debt instruments. This will cushion you against any downturns due to investments in high-risk assets.
The funds that you shortlist using these criteria will be consistent performers and are most likely managed by exceptional fund managers.Check for the profile of the fund managers and the AMC management. This can be found in the prospectus of the respective Mutual Funds.If you follow the above process, it will help you make an informed decision and choose the right Mutual Fund for you. Though exhaustive, you need to do all this to ensure that you are taking the right decision, more so if you are a new investor with little knowledge on investing in Mutual Funds and the markets as such.Importance Of Diversification