Mutual Funds : We have often seen this advertisement on TV or any other platform. In such a situation, many people wish to invest in it but as soon as they come to know that there is a risk in it, they get scared. Many people have heard of mutual funds but do not know about it. Let us know about mutual funds in detail.
There are many options available in the market for investment. Among these options, mutual funds are much talked about. Advertisements related to mutual funds are often seen on TV, mobile numbers or even on the road.
Mutual funds may have become a popular option for investing, but there is risk in it. In such a situation, many people get scared even before investing in it. At the same time, many people still do not know what a mutual fund is? How to invest in it so that the risk is reduced.
What is a Mutual Fund?
Mutual fund is also a type of fund. In this, many people deposit money at one place. The money invested by investors is invested in stocks, bonds, money market instruments and other types of equities.
Let us tell you that Asset Management Companies (AMC) manage mutual funds. Asset Management Companies have many mutual fund schemes.
Whoever invests in a mutual fund gets a share in the fund’s profit, loss, income etc. In simple terms, a mutual fund is a large-sized pizza and investing in it is like buying small pieces of pizza.
How many types of Mutual Funds are there (Types of Mutual Funds)
There are many types of mutual funds. Types of mutual funds:
- The investment amount in Equity Funds is used in the stock market.
- In Debt Funds, money raised from investors is used to invest in treasury bills, corporate bonds and government securities.
- Balanced or Hybrid Funds are a mixture of equity and debt funds. In this, the investor invests only for profit without taking any risk.
- Investments are made in Solution-Oriented Funds for a specific goal. In a way, it is a combination of equity, debt and hybrid funds.
How to invest in Mutual Fund? (How to invest in Mutual Fund?)
- If an investor wishes, he can invest a lump sum amount in a mutual fund or can also invest through a Systematic Investment Plan (SIP).
- Apart from this, direct investment can also be made in mutual funds, that is, you can invest by visiting the website or app. In this, the fund house charge is less.
- If the investor selects the option of regular investment, then a higher expense ratio has to be paid. Investors who do not have much knowledge about online investment should make regular investment.
- Let us tell you that many types of charges have to be paid in mutual funds. Actually, this fund comes under the rules of mutual fund short term capital gains (STCG) and long term capital gains (LTCG).
How does a loss occur in mutual funds
- There is risk in mutual funds. There is a possibility of loss on the investment amount. However, according to many experts, the performance of mutual funds is quite good, so the possibility of risk has reduced.
- Actually, mutual funds are connected to the stock market. In such a situation, the fund in which you have invested decides whether you will incur a loss or not. If you have invested in equity funds, then you will incur a profit or loss according to the movement of the stock market.
- Many funds have a lock-in period. Although the investment amount cannot be withdrawn during the lock-in period, in certain situations investors can withdraw money from the fund. In such a situation, if the investor withdraws from the fund during the lock-in period, he may have to face a loss.
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