Mutual Funds Explained!

 

We have heard about Mutual Funds many times, even if you have read it on my previous blog. But many people are confused about what type of mutual fund we have to invest in. So today we are going to discuss the following points.

1. What is Mutual Fund?

2. What are the types of Mutual Funds?

3. How to Invest and Where to Invest?

So let us understand the meaning of a mutual fund.

When an individual is not having specific knowledge or time for investing the money, he/she gives the money to the money managing company and the money manager invests their money on their behalf by charging commission or management fees of 1-3%. This money is collected by us and invested altogether. For example, you hired a driver to drive your car and you are paying for the same. 

We have understood the meaning now let us have a look at the types of Mutual Funds.

There are five types of Mutual Funds available in the Indian Market.

1. Equity - Equity Mutual Fund mainly focuses on Stock Market where the pooled money is invested in the stock market. An example of an equity mutual fund is SBI Long-term Equity Growth Fund.

2. Debt - The debt fund is safer than Equity funds as the pooled amount is being invested in Government bonds and schemes. As a result, these funds have lower returns than Equity. An example of a debt mutual fund is HDFC Short Term Debt Fund. 

3. Hybrid - The name explains itself, the hybrid fund is the sum of some proportion of Equity and Debt funds altogether. That helps to diversify the portfolio of the investor. An example of a hybrid fund is SBI Equity Hybrid Fund.

4. Solution Oriented - Solution Oriented funds are the goal-based funds that are being invested for a specific purpose only. For example, I want to purchase a house. So the investment will be done accordingly. An example of a solution-oriented fund is Tata Retirement Savings Fund.

5. Others - When the pooled amount is invested directly in the indexes then it is called as Index Fund that is categorized in Others. An example is UTI Nifty 50 Index Funds.

So, we have understood the types of funds but the question arises that how and where to invest?

In India, there are so many brokers available. I personally use GROWW APP as it doesn't charge any commission and there are no hidden charges. There is a huge number of mutual funds available on the app. They are classified into different categories like High Returns, Tax Savings, etc. If you want to invest in any fund, then do the proper research on the returns you need. Mutual Funds are subject to market risk, invest carefully. 

I hope you have got an understandable insight into Mutual Fund from this blog. Thank you for reading. Comment down below what you want to read in the next blog.

Thank You.