What are Mutual Funds? Types of Mutual Funds, Schemes and Benefits

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What are Mutual Funds? Types of Mutual Funds,
Schemes and Benefits Gill Broking
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• The latest Mutual fund investment scheme in India
  is developing at a really fast rate. In February
  2019, this sector recorded a total amount of up
  to 23.16 trillion in AAUM (Average Assets Under
  Management). In 2009, AAUM showed approximately 5
  trillion. The figures clearly suggest how this
  industry has increased by 4 times within 10
  years. Currently, India has over 2,500 mutual
  fund schemes and 44 AMFI.
• As mutual funds differ in types, it gets quite
  challenging for investors to pick the right type
  of investment funds and kick start their
  investment careers. In this PPT, we'll talk about
  mutual funds, the types, benefits of investing in
  MF, total schemes, and etc. But before we get
  started, let's have a quick look at the meaning
  of mutual funds investment.

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What are Mutual Funds?

• A mutual fund is one of the famous investment
  instruments that collect money from novices and
  professional investors. The money is collected in
  different asset classes namely equity shares,
  debt, gold, foreign securities, and the list goes
  on. Mutual Funds are regulated and managed by
  SEBI and the Association of Mutual Funds in
  India. They are safe, transparent, reliable, and
  flexible forms of investment. But, the question
  is why people love to invest in mutual funds?
• It is no longer an era when people would invest
  in traditional investment instruments. Whether it
  is a beginner or professional investor, mutual
  funds seem the most reliable and secure option
  for investment. Furthermore, these funds come in
  a wide range of schemes and types. You can build
  your investment portfolio for just 500/-

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• Depending on the investment plan you choose,
  mutual funds allow investors to build their
  investment portfolio for Rs 500 and get started
  with the investment procedure. Another major
  advantage of mutual funds is that it is handled
  by professional fund managers, who possess years
  of experience in managing financial profiles of
  the investors. No matter which mutual fund
  investment scheme you opt for, you can rest
  assured that your money is safe with financial
  experts. Lets learn about the types of mutual
  funds in India.

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Types of Mutual Funds

• Basically, there are three types of mutual funds
  categories in India debt funds, equity funds,
  and hybrid funds. Depending on your risk
  appetite, investment goals, and overall
  investment profile you can pick any of the
  below-listed mutual funds.

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1) Equity Funds

• One of the most common types of equity funds, in
  which more than 65 of the investments are used
  for equity instruments, are known as equity
  funds. In the simplest terms, equity funds are
  long-term investment plans where investors put
  their money in reputable companies. The growth of
  the companies decides the rate of returns for
  investors. Equity funds are the most reliable
  option for investors who are ready to bear
  significant risk in order to obtain fruitful
  results.
• As equity funds depend on the stock and economy,
  they come with a high risk. That's the reason why
  they are only preferred by professional
  investors. According to SEBI and AMFI, there are
  a total of 11 types of equity funds out on the
  market. However, the most common type of equity
  fund is ELSS (Equity Linked Savings Scheme). It
  is specially developed for investors who are on
  the lookout for a tax-saving investment funds
  option.

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• The investments in ELSS can save you up to 1.5
  lakh on tax. However, there is a specific lock-in
  period (usually, 3 years) in the tax-saving
  investment funds. It is important to note that
  equity funds come with a lock-in period. You
  might need to invest funds for as long as 5 years
  if you want to receive the maximum perks. This is
  because the growth of the companies takes years.
  If you want your money to grow rapidly, then
  equity funds are the best pick!

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2) Debt Funds

• Another famous type of Mutual fund is debt funds,
  where a major portion of the money is invested in
  money market securities and debt. Any mutual fund
  where less than 65 of the total money is
  invested in the equity market is debt fund. Debt
  Funds is a reliable and secure form of investment
  option for investors with low-risk appetite. If
  you are not willing to take higher risks, then
  debt funds should be your number 1 priority.
• Now that these funds are associated with lower
  risk, they offer a comparatively lower rate of
  returns than equity funds. However, they are far
  better than fixed deposits and other traditional
  investment instruments. Debt funds offer higher
  ROI than fixed investment funds, but their
  results are not as fruitful as equity funds. SEBI
  has introduced 16 types of debt funds.

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• One of the most popular debt fund investment
  options is liquid funds. Not only are they less
  risky, but debt funds offer a maximum rate of
  returns to the investors. In liquid funds, the
  money is invested in the money market securities
  that come with a maturity period of 91 days. As
  they have a shorter maturity period, they carry
  the least amount of risk.

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3) Hybrid Funds

• As the name implies, hybrid funds are the special
  mutual fund's type where the money is invested in
  either two or more than 2 securities. For
  example, investors can opt for hybrid funds where
  they can invest in both equity and debt funds.
• Hybrid funds are often considered balanced funds
  since they lower the risk of your investment
  while increasing the chance of high returns. As
  you invest in equity funds, you get a higher ROI.
  On the contrary, your risk is lowered as the
  portion of your money is also invested in debt
  funds. There are 7 types of hybrid mutual funds
  available on the market.
• The most popular type of hybrid funds is Dynamic
  Asset Allocation Funds. The best part about this
  mutual fund investment scheme is the investors
  get an opportunity of investing their money i.e.
  anywhere between 0 to 100 percent in equity and
  debt. There is no fixed ratio that you are
  obligated to follow.

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Benefits of Mutual Funds Investments

• From the above examples and schemes, we assume
  that the meaning and purpose of mutual funds are
  already clear to you. On that note, lets move to
  the other section of the post which is benefits
  of investing in mutual funds.

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Professional Funds Management

• When you invest in mutual funds, you allow an
  expert financial manager to track, monitor, and
  look after all your investments. You dont have
  to manage your investments. In fact, all your
  investments are managed by professionals who
  possess years of experience in dealing with
  investment instruments. Every investor is liable
  to pay a certain percentage of fees on their
  returns. This fee is known as expense ratio and
  is paid for the administration and management
  works.
• The expense ratio can vary from 0.5 to 1.5.
  But, it must not go beyond 2.5. Mutual fund
  houses reveal the rate of returns in each mutual
  fund scheme after deducting the expense ratio.

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High returns

• The reason why a majority of investors interest
  is shifting towards mutual funds investment is
  the high rate of returns. Gone are the days when
  traditional investment methods such as Gold,
  commodities, FDs, and precious metals were
  popular. Today, mutual funds are considered the
  most reliable and flexible investment solution
  for investors across India.
• You can expect up to 7 of ROI in investments.
  The rate of returns can go up to 15 if you
  invest in equity funds for over 5 years. The high
  rate of returns is the main reason why most of
  the investors prefer mutual funds instead of
  relying on the traditional form of investments.

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Flexible Investment

• You don't have to invest all your savings in one
  go if you choose mutual funds investment. Mutual
  funds come with two types of investment plans
  i.e. lump-sum payment and SIP. If you choose the
  latter, you get a chance of starting your
  investment with as slow as Rs 500/- in your
  investment account. Yes, you read it right! The
  minimum amount you need to get started with the
  mutual fund's investment is Rs 500 whereas the
  maximum limit is not available.
• If you opt for SIP investment plan, a set amount
  of money automatically deducts from your bank
  account every month and transfers to the mutual
  fund's account. For example, if you select a
  500/- per month investment, this amount will be
  debited from your bank every month automatically.
  The small investments generate high returns at
  the time of maturity.

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Portfolio Diversification

• Mutual funds are known for three main fund
  categories that are mentioned above. You can
  always balance your risk by investing in
  different funds and diversify your investment
  portfolio. For example, if you choose a hybrid
  funds investment option, you can minimize the
  risk while increasing the chances of higher
  returns.

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A Systematic Investment Plan (SIP)

• As discussed above, the systematic investment
  plan (SIP) is the best mutual fund investment
  scheme for investors who do not want to risk all
  their savings by paying the entire amount in one
  go. SIP allows investors to choose the interval
  period as well as the amount they want to get
  deducted at each interval. For example, you can
  fix monthly, quarterly, or weekly mutual funds
  investment option where a specific amount set by
  you will be deducted from your bank account
  automatically.
• Furthermore, this plan allows you to modify the
  monthly payment amount according to your
  financial condition.

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Tax Benefit

• A lot of investors consider the ELSS (Equity
  Liked Saving Scheme) investment plan to avail of
  tax benefits. Under section 80c of the Income Tax
  Act, the investors who put their money in ELSS
  can save up to 1.5 lakh on tax. However, ELSS
  comes with a lock-in period that is up to 3
  years. You won't be able to redeem money before
  the ELSS reaches its maturity period.
• The best part is even if you choose the other
  types of investment options (which don't
  specifically focus on tax saving benefit) you
  won't be charged tax for amount up to 1 lakh. 
  You are only liable to pay tax on the earnings
  that exceed 1 lakh.

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The Working of Mutual Funds

• Everyone knows how important mutual funds are and
  how can they grow your money rapidly. But the
  question is how exactly the mutual funds work?
  Before you invest in mutual funds, it is
  important to learn the working of this investment
  product right from the launch of MF to its
  maturity period.
• 1) The mutual fund investment process starts when
  AMC discovers the right money-making opportunity
  that is subject to certain risks in the market.
• 2) The fund house or AMC compares the latest
  investment opportunities with the ones already
  existing. They also take into consideration the
  pros, risks, and drawbacks of the new investment
  products and analyze if the same can outperform
  the existing investment plans.

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• 3) The AMC selects a financial investment manager
  who's responsible for creating a portfolio of
  multiple asset classes. The fund manager then
  chooses the right mutual fund category for the
  new investment product.
• 4) As soon as the fund house gets SEBIs approval
  for the launch of the new mutual fund investment
  product, they introduce it in the market. Also
  known as New Fund Offer, the NFO stays on the
  market for a week or 10 days.
• Open your free trading account

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Some of the most common mutual fund's investment
houses in our country are as follows

• 1) ICICI Prudential Mutual Fund 
• 2) Reliance Mutual Fund
• 3) Franklin Templeton Mutual Fund
• 4) Aditya Birla Sun Life Mutual Fund
• 5) HDFC Mutual Fund
• 6) SBI Mutual Fund
• 7) Axis Mutual Fund
• 8) Kotak Mahindra Mutual Fund
• According to the subscription period, one can
  categorize the funds as close-ended and
  open-ended mutual funds investment plans. The
  latter allows people to enter and leave the
  funds investment whenever they want. However,
  the close-ended investment plan restricts the
  exit of investors until the maturity period of
  the scheme (which is usually 3 to 4 years).

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• Contact Us
• For complete information about mutual funds, get
  in touch with trading experts specialized to
  offer investing in mutual funds.
• Gill Broking
• Phone No 011-40345555, 8750000121
• Address B-98-99, Third Floor, Lajpat Nagar-1,
  New Delhi, India 110024
• Email ID mf_at_gillbroking.com
• Website - https//mf.gillbroking.com