ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How to invest in Mutual Funds in India?

Updated on August 5, 2017

How mutual funds work? Benefit of Mutual funds. How to invest in Mutual Funds in India?

Mutual fund is a form of investment just like stocks, Gold or real estate. But what makes it special is that it uses money from investors to invest in other types of investment like stocks, bonds etc. A fund manager or portfolio manager in charge of the funds decides how to invest the money most profitably in different types of securities

What makes Mutual funds special? Mutual fund is an investment option through which you could invest in various market instruments like Stocks, Bonds, Exchange traded Funds (ETF) etc. It is simply a basket of funds that is managed by a professional fund manager. The difference between stocks and mutual funds is that in the former, you will directly invest in a particular company whereas the latter is a fund that is invested in a collection of instruments. Certain mutual funds may invest in Stocks, some may invest in bonds and some may invest in a variety of instruments. Mutual funds are not entirely risk free. They are dependent on market situation like stocks. However, compared to stocks, they are relatively safe since the risk is distributed equally among the instruments. Even if a particular company’s stock within the fund performs badly, another company’s stock will perform better. Similarly, in case of a fund invested in a variety of instruments, even if the stocks perform badly, the bonds may perform fairly well.

Further, investing directly in stock market requires knowledge of industry and the capital market. You need to know when the market will be bullish. In case of mutual funds, the company’s experts will take care of this problem.

Good returns: There are mutual funds that have returned an average of 20% each year. For example, Reliance Growth Fund, a midcap fund has returned handsome returns over the past 10 years. Birla Sun Life Advantage Fund is another example

Beat inflation: Mutual funds are a great way to beat inflation. You may get returns in other investments but they may be nullified by the effect of inflation. For example, if you invest Rs 1000 in a Savings bank account and the bank offers an interest rate of 5%. Your investment will become Rs 1050 after a year. However, if at this period inflation is at 5%, the interest you earned will be nullified. Hence, mutual funds are an ideal investment for long-term inflation adjusted growth

Return Value of some popular Mutual funds in India

Low cost investment: Mutual funds are ideal for young investors. Through mutual funds, you can invest small amounts of money. In case of stocks, you will need to invest a substantial amount in order to benefit from the slight movement in the prices. Also it’s a volatile investment that may keep off new and young investors.

Transparency: Investing in mutual funds is transparent. Fund managers have to provide regular information about the current value of investment, and their future strategy in order to give a clear picture to customers

Net Asset Value (NAV): NAV represents the assets of a mutual fund, minus its liabilities. When you invest in a mutual fund, your investment will be allocated a certain net asset value. The percentage increase in the fund’s NAV will determine the actual increase in the value of your investment

Index mutual funds: Index funds work similar to Exchange traded funds. Index funds are equity funds that track a particular equity index and invest in the same. For example, if TATA Motors Company has 10% weightage in an equity index, a fund based on the index would also invest 10% of its portfolio in the TATA motors stock. Index mutual funds eliminate fund manager risk. In cases, people may worry about the ability of fund managers. Opting for index mutual funds is a solution to overcome this issue

How can you make money using a Mutual fund? Basically, there are two ways through which a mutual fund gives profit. First, you could sell the fund and get a capital gain. Secondly, you could keep the fund and continue to receive distributions of dividends, interest and capital gains etc that the fund accrues on its investments.

Income generated through mutual funds is subject to taxation.

How to enroll for a mutual fund? If you already have a demat account, you can use it for mutual funds as well. All stock brokers are linked to BSE and NSE mutual fund platforms. Alternatively, you can enroll with an AMC (asset Management Company). You can download the relevant forms their websites. You need to submit details like KYC (Know your customer) and PAN card number.

Costs involved with a mutual fund include management charges levied by AMCs. Brokers may levy brokerage charges

Top performing mutual funds in India: Some of the best performing mutual funds over the last 5 years are Franklin India Blue Chip fund, HDFC Equity, Birla Sun life Advantage Fund, Reliance Equity, ICICI Pru Balanced fund etc

Different Types of Mutual Funds courtesy: Economic Times

Introduction to Mutual funds courtesy: Youtube

Comments

    0 of 8192 characters used
    Post Comment

    • JvicIndia profile imageAUTHOR

      John 

      2 years ago from India

      Hi Guys...Hope this hub will be useful to you

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)