What Are Mutual Funds?
A Mutual Fund is an investment product that pools money from a group of investors and invest in targeted asset class with certain investment objective. An investor of a Mutual Fund becomes the stakeholder of the underlying assets and the income generated from these underlying holdings are distributed amongst the investors proportionately. Mutual Funds can be an ideal investment choice, given their ease of use and advantages.
Benefits Of Investing In Mutual Funds
Funds Based On Asset Class
efficiently managing funds and assisting investors.
How Do Mutual Funds Work?
A Mutual Fund is run by Asset Management Company as a trust which collects money from various like-minded investors. Asset Management Companies (AMCs) may manage many mutual fund schemes. Each scheme has a specific investment objective catering to distinct investment needs. Based on the fund’s purpose, the money collected from investors is placed in various avenues such as stocks, gold, bonds, and other securities. The Fund Manager of these schemes aims to earn optimum returns on the investment, oversees the market and invests accordingly. The income generated by the fund is divided and distributed among the investors proportionately.
- Risk : The most significant benefit of an FD is the guaranteed and fixed returns in the form of interest. In mutual funds, there is no guarantee and the loss and profit move per the market’s volatility.
- ROI Money : FDs have a guaranteed return, whereas, in mutual funds, there is no guarantee of return on the investment as it is dependent on the market. Although, in the long run, they earn much higher returns than FD.
- Liquidity : Individuals and corporates.
- Tax Liability : The bank FD returns are taxed as per your income bracket upon maturity. On the other hand, mutual funds enjoy tax benefits and fixed indexation tax rates on the returns. Now you know where to drop by if you are looking for the best mutual funds to invest in.
While no investment in the world is risk-free, the mutual funds’ investments plan of SWYOM which is an online mutual fund investment platform is considered a safe investment because of three main reasons:
It is not a flight-by-night scheme, and no one will run away with all your money. They are safe as mutual funds companies are regulated and supervised by the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI).
The strategy behind mutual funds is to earn higher returns that are also tax efficient. They do not guarantee capital protection or fixed returns but provide higher returns than traditional investment instruments. They result in greater market exposure and are managed by experienced finance managers.
They are highly taxed efficiently as they are taxed in a way that doesn’t touch the returns earned. They are best for long-term investments, but in the short term also reap this tax benefit. The risk can be managed very well as the portfolio is usually diverse, with a mix of equity, bonds, and debts. Each promises different financial goals.
These are highly liquid assets and can be withdrawn at any time. While sales and purchases can occur at any time of the day, the money is generally transferred out at the market day’s close.
The minimum investment possible is Rs. 100 in SIP and Rs. 1,000 in a lump sum, but at the very least, Rs. 500 is suggested. Contact SWYOM today to know everything about how to invest in mutual funds in India.
As a long-term asset, mutual funds can be highly profitable. The average returns on investment based on the top 20 performing ones over the last two decades are annualized at 9.75%.