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Indian Mutual Funds Basics

Mutual funds basics, what are mutual funds, what things to keep in mind before choosing mutual funds?, Classification of Mutual Funds.
free tutorial of mutual funds
mutual funds basics for indians

We all have heard from the investors that it is good to invest in mutual funds if any one is not able to analyse the shares or if any one is not able to take the risk to invest personally in shares due to high risk.

Although mutual funds are also subjected to high risk and the profits depends upon the market movement but since professionals are hired by mutual funds companies so it become easier to invest.

If you are a beginner or if you want basic knowledge on this type of investment then here is the free guide by "". But it is very important to know that what are mutual funds and how to invest in it ?

Let's Understand Mutual Funds Easily:
There are many types of investment sectors In India like stock market, bonds, commodity market, Equities, debentures, share market etc. Mutual fund companies are those who take our money and invest in these sectors and give us a fixed returns every year. We can also call them 'funds caring companies'.

These companies collect money from investors and invest in huge, The profit which they gain is distributed to the investors as per guidelines. Here even middle class person is also able to earn from different types of investment sectors but indirectly. At front end investor knows only the company but in back end many high risk activities are going on.

Mutual fund companies appoint fund managers , the work of these professionals are to understand the market risk and to invest the collected amount in this way that profit must come out. Fund managers use there experience knowledge and do the work of analysis, investment, rotation of money in our behalf.

There is a portfolio of every mutual fund companies, it means the ratio they are using to invest in different sectors. We can know about it by reading the details of any mutual fund companies.

Keep in mind always that these companies assure about return but there is no guarantee so risk is there in every investment. Read companies policies before investment.

Do You know Who control Mutual Funds?

Securities Exchange Board Of India(SEBI) regulates these companies and there are strict rule so that investors may not get cheated by any mutual funds companies. Every mutual fund companies must follow the rules and regulations made by SEBI.

How Mutual Fund Companies Earn From Investors?
These companies take charges to handle our account which is known as Entry and Exit Load, generally it is 2% of investment amount. We can find this while reading the policies.

What is NAV?
This is the way to know about our investment. NAV means Net Asset Value, If it is increasing that means your fund is increasing and if it is decreasing that means you are loosing money.
So we can track the performance of any mutual fund by checking there NAVs'.

Now Let's Read About Some Advantages Of Investing In Mutual Funds:

  1. We can free ourselves from the burden of analysing the companies to invest.
  2. There is no need to read details daily about investment sectors as the fund manager will do it on our behalf.
  3. Risk can be minimized easily by investing in mutual fund.
  4. Easy to invest and redemption is also easy.
  5. No need to watch market continuously.
  6. No need to fear about market ups and down.
Let's Know Some Classification of Mutual Funds:
As per the portfolio of fund we can classify them in different category like as -
  • If the company is investing in government bonds , securities to get a fixed return then it is called "Debt mutual funds", This is the safest way to get fixed return on our
  • investment but return is low in comparison to risky funds.
  • If the investments are done totally in shares then the mutual fund comes in category of Equity. It is high risky and return is more in comparison to debt fund.
  • 3. Some companies use balanced approach and invest in equity as well as in debt sectors, they are called balanced mutual funds.
  • Some mutual funds have lock in period and they are called close ended and return are higher in these. But we will be able to take out money only after the lockin period.
  • Some mutual funds have no lock in period and they are called open ended, so we can take out our money at any time.
So mutual funds are one of the best option to invest and to earn but not in a short period. Don't expect return in a few months, this is a practical we can see in market.

Give some years and do invest regularly to get good return in your investment.
Read More Related Interesting Articles On:
General mistakes done by novice investors 
What is mutual funds?
What is SIP?
What is ELSS fund?
Why One Should Invest in Diversified Equity fund?

Mutual funds basics, what are mutual funds, what things to keep in mind before choosing mutual funds?, Classification of Mutual Funds.


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