A mutual fund collects money from the investors and invest the money on their behalf. It charges a little fee for managing the money. Mutual funds help the people who are willing to invest but not much aware about investments. There are different types of mutual funds. People can choose mutual fund schemes and invest as per their financial state and their goals. Mutual funds are an ideal investment for regular investors.
You can either invest directly with a mutual fund or can take help from the services of a mutual fund advisor. If you are investing directly, you will invest in the direct plan of a mutual fund scheme. If you are investing through an advisor or intermediary, you will invest in the regular plan of the scheme.
There are various myths about mutual funds and people do not know the real facts about the funds. Some of us are really afraid to invest in the mutual funds because of the myths and this happens because of our less awareness about the mutual funds. Investing in the mutual funds can actually be a good idea if you know the facts regarding the funds. Here is a small guideline for you :
- #Fact 1: Mutual funds are not only meant for experts.
- #Fact 2: Not every mutual fund is made for long run.
- #Fact 3: No. You don’t have to invest a lot of money in a mutual fund.
- #Fact 4: Mutual Funds invest in stock market, bond market, and Money Market instruments
- #Fact 5: Holding mutual fund units in Demat mode is not compulsory except in respect of Exchange Traded Funds.
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#Fact 1: Mutual funds are not only meant for experts.
Yes! They are for common investors who are less aware of the information regarding the investment and securities. Mutual funds are professionally managed by expert fund managers after in depth market research and it is beneficial for the investors. It is such an inexpensive way to get a full time fund manager to manage their money. So you can invest in mutual funds without worrying.
#Fact 2: Not every mutual fund is made for long run.
It completely depends on your investment horizon and goals whether you will invest in the long term mutual fund or short term mutual fund. If you are hesitant to invest in long term mutual fund investment, here are various short term mutual funds in the market. You can even invest for a few weeks. So go ahead.
#Fact 3: No. You don’t have to invest a lot of money in a mutual fund.
It is not necessary that every investor invests a large amount of money in their mutual funds and especially when you are going to invest for the first time, then you can start investing mutual funds with just ₹5000 for a lump-sum / one-time investment with no upper limit and ₹1000 towards subsequent / additional subscription in most of the mutual fund schemes.
#Fact 4: Mutual Funds invest in stock market, bond market, and Money Market instruments
Mutual Funds invest in stock market, bond market, and Money Market instruments such as Treasury Bills, Commercial Papers, Certificate of Deposit, Collateral Borrowing & Lending Obligation etc. Many of these instruments are not available to retail investors due to large ticket size of minimum order quantity and hence, retail investors could participate in such investments through mutual fund schemes .
#Fact 5: Holding mutual fund units in Demat mode is not compulsory except in respect of Exchange Traded Funds.
For other schemes including the close ended schemes like Fixed Maturity Plans, it is completely up to you whether to hold the units in Demat mode or conventional physical account statement mode.
There are various mutual fund in India such as equity Mutual funds, Debt mutual funds, Hybrid mutual funds and Solution oriented mutual funds. So go through the details before you invest. It is really easy and various finance related websites can be a guide for you.