Mutual Funds 101

Mutual funds could help you grow your money without needing to know much about the stock market. They gather money from various investors to create a diversified portfolio of assets like stocks, bonds, and government securities. Managed by Asset Management Companies (AMCs), these funds employ professional fund managers. These managers analyse market trends and adjust investments to optimise returns and manage risks. In India, the Securities and Exchange Board of India (SEBI) regulates these funds. To invest, you buy 'units' of a mutual fund, each with a value known as the Net Asset Value (NAV). NAV could be subject to changes based on the market fluctuations. You could invest in these funds through a lump sum amount or an SIP, where you invest small amounts regularly. You could review the fund you’re investing in using the Fund Fact Sheet. This document contains details on the fund’s objectives, portfolio, performance, and other key metrics that might be of use. You could check out ELSS for income tax deductions of up to Rs. 1.5 Lakhs under Section 80C of the IT Act. Whether you’re saving for retirement, education, or other goals, mutual funds could help you achieve your financial goals.

Mutual funds offer diverse investment options categorised into three main types. These are equity, debt, and hybrid funds. Equity funds invest in the stock market, carrying higher risk with a potential for greater returns. They include ELSS, large-cap, mid-cap, small-cap funds, sectoral and thematic funds, etc. Debt funds focus on fixed-income assets like corporate debentures and government securities. They provide relatively stable returns with lower risk. Hybrid funds combine equity and debt investments to balance risk and returns. Asset management companies (AMCs) offer various mutual fund options. They can be classified based on market capitalization, investment duration, and so on. Multi-cap funds invest across company sizes and sectors. Sectoral funds focus on particular industries. Investors can use an SIP calculator to plan regular investments in these funds. Conversely, they could use a lump sum calculator to determine returns for one-time investments. Understanding the different types of mutual funds could help you align your financial goals and risk tolerance. For example, ELSS funds offer tax benefits under Section 80C of the Income Tax Act. Debt funds include overnight funds, liquid funds, money market funds, etc. Hybrid funds offer sub-types like aggressive and conservative options. Investors could also explore other types to best match their investment horizon.

Investing in mutual funds need not be as daunting as it seems. Start by assessing your risk tolerance and defining your financial goals. Based on this, you could choose a fund type. Then, decide how much you wish to invest without impacting your monthly expenses. You could invest online or offline. Online investments could be made through the website/app of various AMCs, financial services companies, or your bank. If you wish to invest offline, you might need to visit the respective entities’ branches. After choosing a platform, create an account with basic information like name, phone number, PAN, and bank details. Then, complete the KYC or Know Your Customer process using PAN and Aadhaar, either online or offline. Next, select your investment method. You could opt for an SIP (Systematic Investment Plan) for regular investments or lumpsum for a one-time large amount. For further help, you could reach out to an AMC representative or a SEBI Registered Investment Advisor (RIA). You could monitor and manage your mutual fund portfolio online through the platforms of the entities mentioned. This might allow you to buy more units, sell, or switch funds as needed. Always be mindful of the risks involved in investing.