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Go Back to Main Page What is a Mutual Fund?

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A mutual fund is an investment vehicle where many investors pool their money to earn returns on their capital over a period. This corpus of funds is managed by an investment professional known as a fund manager or portfolio manager. It is his/her job to invest the corpus in different securities such as bonds, stocks, gold and other assets and seek to provide potential returns. The gains (or losses) on the investment are shared collectively by the investors in proportion to their contribution to the fund.

Why invest in mutual funds

There are many benefits of investing in mutual funds. Here are some important ones -

  1. Professional expertise
    Consider a situation where you purchase a new car. But the catch here is that you don’t know how to drive. Now, you have two options:

    i) you can learn how to drive
    ii) you can hire a full-time driver

    In the first scenario, you would have to take driving lessons, pass the driving test and obtain a license. But if you don’t have the time for driving classes, it is better to opt for a driver. Same is the case with investments.
    Investing in financial markets requires a certain amount of skill. You need to research the market and analyse the best options available. You need knowledge on matters such as macro economy, sectors, company financials, from an asset class perspective. This requires a significant amount of time and commitment from you.

    But if you don’t have the skill or the time to delve deep into the market, investing in mutual funds can be an excellent alternative. Here, a professional fund manager takes care of your investments and strives hard to provide reasonable returns. And just as you would pay the driver for his chauffeuring services, you have to pay specific fees for the professional management of your mutual fund investments.
  2. Returns
    One of the biggest mutual fund benefits is that you have the opportunity to earn potentially higher returns than traditional investment options offering assured returns. This is because the returns on mutual funds are linked to the market’s performance. So, if the market is on a bull run and it does exceedingly well, the impact would be reflected in the value of your fund. However, a poor performance in the market could negatively impact your investments. Unlike traditional investments ,mutual funds do not assure capital protection. So do your research and invest in funds that can help you meet your financial goals at the right time in life.
  3. Diversification
    You may have heard the saying: Don’t put all your eggs in one basket. This is a famous mantra to remember when you invest your money. When you invest only in a single asset, you could risk a loss if the market crashes. However, you can avoid this problem by investing in different asset classes and diversifying your portfolio.
    If you were investing in stocks and had to diversify, you would have to select at least ten stocks carefully from different sectors. This can be a lengthy, time-consuming process. But when you invest in mutual funds, you achieve diversification instantly. For instance, if you invest in a mutual fund that tracks the BSE Sensex, you would get access to as many as 30 stocks across sectors in a single fund. This could reduce your risk to a large extent.
  4. Tax benefits
    Mutual fund investors can claim a tax deduction of up to Rs. 1.5 lakh by investing in Equity Linked Savings Schemes (ELSS). This tax benefit is eligible under Section 80C of the Income Tax Act. ELSS funds come with a lock-in period of 3 years. Hence, if you invest in ELSS funds, you can only withdraw your money after the lock-in period ends.
    Another tax benefit is indexation benefit available on debt funds. In case of traditional products, all interest earned is subject to tax. However, in case of debt mutual funds, only the returns earned over and above the inflation rate (embedded in cost inflation index {CII}) are subject to tax. This could also help investors earn higher post tax returns.

What are different types of mutual funds?

When you enter a car showroom, you see lots of different cars. There are hatchbacks, sedans, SUVs and maybe even sports cars. Each car in the showroom serves a different purpose. An adventurous person may prefer a sports car while a family man with kids (and a pet) may opt for an SUV. In the same way, there are different types of mutual funds in India.

Each fund type aims to achieve specific goals. Here are the most popular types of mutual funds you can find:

Types of funds based on asset class:

  1. Debt funds
    Debt funds (also known as fixed income funds) invest in assets like government securities and corporate bonds. These funds aim to offer reasonable returns to the investor and are considered relatively less risky. These funds are ideal if you aim for a steady income and are averse to risk.
  2. Equity funds
    In contrast to debt funds, equity funds invest your money in stocks. Capital appreciation is an important objective for these funds. But since the returns on equity funds are linked to market movements of stocks, these funds have a higher degree of risk. They are a good choice if you want to invest for long term goals such as retirement planning or buying a house as the level of risk comes down over time.
  3. Hybrid funds
    What if you want equity as well as debt in your investment? Well, hybrid funds are the answer. Hybrid funds invest in a mix of both equity and fixed income securities. Based on the allocation between equity and debt (asset allocation), hybrid funds are further classified into various sub-categories.

Types funds based on structure:

  1. Open-ended mutual funds
    Open-ended funds are mutual funds where an investor can invest on any business day. These funds are bought and sold at their Net Asset Value (NAV). Open-ended funds are highly liquid because you can redeem your units from the fund on any business day at your convenience.
  2. Close-ended mutual funds
    Close-ended funds come with a pre-defined maturity period. Investors can invest in the fund only when it is launched and can withdraw their money from the fund only at the time of maturity. These funds are listed just like shares in the stock market. However, they are not very liquid because trading volumes are very less.

Types of funds based on investment objective:

Mutual funds can also be classified basis investment objectives.

  1. Growth funds
    The main objective of growth funds is capital appreciation. These funds put a significant portion of the money in stocks. These funds can be relatively more risky due to high exposure to equity and hence it is good to invest in them for the long-term. But if you are nearing your goal, for example, you may want to avoid these funds.
  2. Income funds
    As the name suggests, income funds try to provide investors with a stable income. These are debt funds that invest mostly in bonds, government securities and certificate of deposits, etc. They are suitable for different -term goals and for investors with a lower-risk appetite.
  3. Liquid funds
    Liquid funds put money in short-term money market instruments like treasury bills, Certificate of Deposits (CDs), term deposits, commercial papers and so on. Liquid funds help to park your surplus money for a few days to a few months or create an emergency fund.
  4. Tax saving funds
    Tax saving funds offer you tax benefits under Section 80C of the Income Tax Act. When you invest in these funds, you can claim deductions up to Rs 1.5 lakh each year. Equity Linked Saving Scheme (ELSS) are an example of tax saving funds.

How Mutual funds and investment goals related?

Now that you know the different types of mutual funds, the question arises: ‘Which is the best mutual fund?’

Well, there is no single or right answer to this question. This is because fund houses design mutual funds to achieve specific financial goals. And as an investor, you need to know which mutual funds can help you achieve your goals in the best way possible.

All your investment goals can be categorized into three broad groups:

  1. Short-term goals (1-3 years): For instance, going on a family vacation in 18 months, buying a car, etc
  2. Medium-term goals (3-5 years): For instance, doing a short term course in digital marketing in 3/4 years
  3. Long-term goals (5 years or more): For instance, buying a house in the next 5-7 years

For any goals upto 12 months, it is better to invest in liquid funds since they are less volatile. Liquid funds can be a good option to create an emergency fund. For goals between 1-3 years, you may want to invest in short term debt funds.

Hybrid funds are more suited for medium-term goals since they have the potential to provide both capital appreciation and stability. For long-term purposes, equity funds are suitable.


What is Systematic Investment Plans (SIP)?

One of the best features about investing in mutual funds is that you don’t need a large amount of money to start investing. Most fund houses in the country allow investors to begin investing with as little as Rs. 500 (some start at Rs. 100) per month through Systematic Investment Plans (SIPs). Now, this might seem like a tiny amount to begin your investment journey, but when you invest consistently over a considerable period, you can achieve a substantial sum.

SIP is a method of investing in mutual funds where you invest a specific amount at fixed intervals. This way, you can avoid timing the market and increase your wealth steadily.

Here’s an example to illustrate the SIP point:

Let’s imagine you invest Rs. 5,000 per month in an equity fund for 15 years. The fund offers an annual return of 12%. At the end of the investment period, you would have amassed a corpus of over Rs. 25 lakh. Now, if you continue investing the same amount for another ten years (total 25 years), you would get a total sum of almost Rs.95 lakh! This is roughly four times the amount in an additional ten years.

This is the power of compounding. The returns you earn in turn begin to make profits for you. So, when you invest for a longer time frame, your gains also rise higher. But to gain the maximum benefit of compounding, you should start investing as early as possible and invest for as long as possible. This can give you an extended investment window to increase your returns.

How to invest in mutual funds

These days, investing in mutual funds has become effortless. You can even do it right from your home. Here are the steps you can follow to begin your investment journey:

  1. Sign up for a mutual fund account on franklintempletonindia.com
  2. Complete your KYC formalities (if you have not yet done so)
  3. Enter the necessary details as required
  4. Identify the funds you wish to invest based on your financial goals
  5. Select the fund and transfer the required amount
  6. You can also create a standing instruction with your bank in case you invest in a SIP each month.

Final thoughts

Investing in mutual funds is one of the simplest ways to achieve your financial goals on time. But before you invest, take an adequate amount of time to go through the different fund options. Don’t invest in a fund because your colleague or friend has invested in it. Identify your goals and invest accordingly. If required, you can approach a financial advisor to help you make the right investment decisions and plan your financial journey.

निवेश की दुनिया में रखने वालों के लिए, म्यूच्युअल फ़ंड्स का नाम भले ही थोड़ा जटिल/पेचीदा हो, मगर सच्चाई यह है कि म्यूच्युअल फ़ंड्स में उलझनवाली कोई बात नहीं है और यह उन लोगों के लिए फ़ायदेमंद है जो इक्विटी, डेट, सोने आदि में निवेश का लाभ तो उठाना चाहते हैं मगर इसके लिए ज़रूरी कौशल, समय या बड़ी पूंजी उनके पास नहीं है. म्यूच्युअल फ़ंड एक प्रोफेशनली मैनेज़्ड इंवेस्टमेन्ट/ professionally managed investment माध्यम है जहां आप छोटी रकम का निवेश करते हैं और बड़े फ़ायदे पाते हैं. इसके लिए बस आपको अपने लक्ष्य बनाते हुए सही स्कीम्स चुननी होंगी. म्यूच्युअल फ़ंड्स आपको अनुकूलता, नकदीकरण क्षमता, टैक्स लाभ और जोखिम का विविधिकरण जैसे कई फ़ायदे, एक छोटी सी कीमत पर दिलाते हैं. इस वीडियो में हम आपको म्यूच्युअल फ़ंड्स की विस्तृत जानकारी देने जा रहे हैं.

પહેલીવાર અનુભવ કરનાર માટે મ્યુચ્યુઅલ ફંડ્‌સ થોડું જટિલ લાગી શકે છે પરંતુ વાસ્તવમાં મ્યુચ્યુઅલ ફંડ્‌સ ગમે તે હોય પણ તેનાથી ભયભીત થવાની જરૂર નથી. મ્યુચ્યુઅલ ફંડ્‌સ ખરેખર તો એમનાં માટે છે જેઓ ઈક્વિટી, ડેબ્ટ, સોનું ઈત્યાદિમાં રોકાણનો લાભ મેળવવા ચાહે છે પરંતુ તે માટેની કુશળતા, સમય અથવા આર્થિક ક્ષમતા નથી ધરાવતા. મ્યુચ્યુઅલ ફંડ્‌સ આ માટે જ છે કેમ કે આ વ્યાવસાયિક ધોરણે સંચાલન કરાતું કલેક્ટિવ ઈન્વેસ્ટમેંટ વેહિકલ છે, જે તમારી માટે તમે નિર્ધારિત કરેલા હેતુઓને અનુરૂપ યોગ્ય સ્કીમ્સની પસંદગી કરો એ મુજબ તમને નાની રકમના રોકાણ દ્વારા મોટા લાભો મેળવવાની ક્ષમતા આપે છે. આ ઉપરાંત, મ્યુચ્યુઅલ ફંડ્‌સ તમને લવચિકતા, પ્રવાહિતા, કર લાભો અને જોખમની વૈવિધ્યપૂર્ણતાના બહુવિધ લાભો પણ ઘણી ઓછી કિંમતમાં પૂરાં પાડે છે. આ વીડિયોમાં અમે તમને મ્યુચ્યુઅલ ફંડ્‌સનો પરિચય કરાવીએ છીએ.

মিউচুয়াল ফান্ড নতুনদের জন্য হয়তো জটিল শোনাতে পারে, কিন্তু বাস্তবে মিউচুয়াল ফান্ড সমন্ধে আতঙ্কিত হওয়ার কিছু নেই| কার্যতভাবে, মিউচুয়াল ফান্ড তাদেরই সুবিধার জন্য যারা ইকু্য়িটি, ডেট, সোনা ইত্যাদিতে বিনিয়োগের সুবিধা নিতে চায় কিন্তু সেটা করার জন্য হয়তো তাদের সেই দক্ষতা, সময় বা আর্থিক রেস্ত থাকে না| ঠিক এখানেই প্রবেশ করে মিউচুয়াল ফান্ড কারণ এটা একটি পেশাদারিত্বের সাথে পরিচালিত যৌথ বিনিয়োগ যান যা আপনাকে দিয়ে ছোট ছোট রাশি বিনিয়োগ করিয়ে দেয় বড় বড় লাভ, যতক্ষণ পর্যন্ত আপনি আপনার লক্ষ্যমাত্রার উপযুক্ত সঠিক প্রকল্পগুলি বাছাই করছেন| মিউচুয়াল ফান্ড আরও দেয় নমনীয়তা, লিক্যুইডিটী, কর সুবিধা এবং ঝুঁকি বৈচিত্র্যের লাভ, খুবই অল্প মূল্যে| এই ভিডিওটির মাধ্যমে আমরা আপনার জন্য মিউচুয়াল ফান্ডের রহস্যভেদ করব|

முதல் முறையாக கேள்விப்படுவோருக்கு, மியூச்சுவல் ஃபண்ட்கள் என்பது ஒரு குழப்பமான விஷயமாக தோன்றலாம் மற்றும் நடைமுறையில் மியூச்சுவல் ஃபண்ட்கள் சற்று பயமூட்டும் ஒன்றாகவும் தோன்றலாம். பங்குகள், கடன் பத்திரங்கள், தங்கம் முதலியவற்றில் முதலீடு செய்து லாபம் பெற விரும்புகிற, ஆனால் அவ்வாறு முதலீடு செய்வதில் திறன் இல்லாதவர்கள், அதற்குரிய நேரம் அல்லது பெரும் தொகை இல்லாதவர்களுக்கு நன்மை அளிப்பதற்காகவே மியூச்சுவல் ஃபண்ட்கள் செயல்படுகின்றன. நீங்கள் சிறு சிறு தொகைகளாக முதலீடு செய்து, பெரிய அளவில் நன்மைகள் பெற முதலீடு செய்யும் விதத்தில் சிறப்பாக நிர்வகிக்கப்படும் ஒட்டுமொத்த முதலீட்டு அமைப்புதான் மியூச்சுவல் ஃபண்ட். எனவே, நீங்கள் உங்களுக்காக நிர்ணயித்துள்ள இலக்குகளுக்கு ஏற்ப தகுந்த திட்டங்களை தேர்ந்தெடுத்தால் உங்களுக்கு நல்ல ஆதாயங்கள் நிச்சயம். மேலும் மியூச்சுவல் ஃபண்ட்கள் முதலீடு செய்வதில் வசதி, ரொக்கமாக்கிக் கொள்தல், வரிச் சலுகைகள் மற்றும் அபாய நிலையை எதிர்கொள்ள மாறுபட்ட விதத்தில் முதலீடு செய்தல் முதலியவற்றை  மிகச் சிறு கட்டணத்தில் அளிக்கின்றன. இந்த வீடியோவில் நாங்கள் உங்களுக்காக மியூச்சுவல் ஃபண்ட்கள் பற்றி விவரிக்கிறோம்.