In this article we cover

  • 1) What are Mutual Funds?

  • 2) How Does a Mutual Fund Work?

  • 3) Why Does the Value of Mutual Funds Change?

  • 4) Are Mutual Funds Safe?

  • 5) What are the Advantages of Mutual Funds?

  • 6) What are the Different Types of Mutual Funds In India?

  • 7) What are the Different Options In Mutual Funds?

  • 8) How are Mutual Funds Taxed?

  • 9) Why Should You Invest In Mutual Funds?

What are Mutual Funds?

Mutual Funds are an investment option where money is collected from various investors. The collected money is then invested in multiple asset classes - Equity , Debt , Hybrid, Gold etc.

A mutual fund pools money from lakhs of investors having the same investment objective. Mutual funds are managed by expert fund managers. These fund managers fund managers
A fund manager is a person appointed by a fund house to manage a Mutual fund scheme and is responsible for making investment decisions based on his research and analysis for the fund. Most of us don’t even bother checking who the fund manager is before investing. Read More
are financial experts and take investment decisions on behalf of the investors. In exchange they charge a small fee, known as expense ratio. Fund managers are appointed by Asset Management Companies (AMC’s).

In a mutual fund, the cost of investment is shared by all investors. The profits and losses are also shared by all investors. Hence the name ‘mutual’ fund.

Watch this video to understand the basics of Mutual Fund

How Does a Mutual Fund Work?

Investors who want to invest in these segments subscribe to this fund or scheme. The fund manager will collect money from lakhs of investors. He will then use this pool of money and invest as per fund’s objective… large cap stocks, mid cap stocks or bonds etc. This is the fund’s underlying portfolio.

The fund manager does not invest the entire corpus in one stock. He diversifies i.e. splits the collected corpus in different stocks. This way loss in one stock can be balanced with profits in another. The fund manager’s job is to monitor this portfolio and make changes as required.

In a mutual fund, all profits, losses and costs are shared by unitholders equally. This is why mutual fund is one of the most cost-effective investment options in India.

Let us understand how a mutual fund works with this simple example:

Suppose you wanted to buy a pizza. The cost of the pizza is ₹ 100. But you only have ₹ 10. So, you and your 9 friends decide to contribute ₹ 10 each to buy the pizza. Each of you gets 1 slice of the pizza.

In this example, pizza slices represent units of a mutual fund scheme . You and your 9 friends become unitholders of a mutual fund scheme. The pizza company is the fund house. Types of pizzas are types of mutual funds offered to investors.

The price you paid to buy 1 pizza slice is the Net Asset Value, (NAV) of the fund. NAV is the market price of 1 mutual fund unit. When you multiply the total number of units with the NAV, you will get the current market price of your investment.

What are mutual funds

Let us take a real-life example to understand how mutual funds work.

Axis Bluechip Fund is one of the best large-cap mutual funds in India. Below are its key features.

Assets under Management (AUM) 28,247.45 Crores
Expense Ratio 1.76%
Investment Objective To achieve long term capital appreciation by investing in a diversified portfolio predominantly consisting of equity and equity related securities of Large Cap companies including derivatives.
Net Asset Value (NAV) as on 15th July 2021 Rs. 42.40
Fund Manager Shreyas Devalkar & Hitesh Das
Asset Management Company (AMC) Axis AMC

Now, to buy one unit of Axis Bluechip Fund, you will have to pay Rs 42.40 as on 15th July 2021. Remember that this will keep changing as the market fluctuates.

Axis AMC launched Axis Bluechip Fund in 2010. The fund’s objective is to invest in large-cap companies. The fund is managed by Shreyas Devalkar & Hitesh Das. For managing this fund, the AMC charges 1.76%.

Total money collected by the fund (AUM) is Rs 28,247.45 crores. To achieve diversification, the fund manager has divided and invested 94.7% in stocks and 5.4% in others.

The below table shows the shares that Axis Bluechip Fund holds as on 15th July 2021.

The remaining 5.4% is invested in the following:

Holdings % Weight
Clearing Corporation of India Ltd 3.57%
3% Axis Bank Limited (31/05/2022) 0.93%
Tata Steel Limited 0.42%
HDFC Bank Limited 0.20%
ICICI Bank Limited 0.20%
Maruti Suzuki India Limited 0.14%
Reliance Industries Limited - Partly paid shares 0.13%
State Bank of India 0.10%
UltraTech Cement Limited 0.06%
Tata Motors Limited 0.05%
Net Receivables / (Payables) -0.45%

But what does fund manager do with the collected money?

The collected money is invested in various asset classes depending upon the type of mutual fund scheme :

Equity Mutual Funds:

The pooled money is invested in stocks of various companies. Since its underlying assets i.e. stocks are volatile, equity mutual funds are risky and suitable for aggressive investors.

Equity mutual funds are further divided into large cap funds, mid cap funds and small cap funds .

Large cap equity funds invest in stocks with market capitalisation more than 20,000 crores. These stocks are known as blue chip stocks . They belong to the biggest companies (1st – 100th) as per market capitalisation. Hence large-cap funds are also known as bluechip funds. Large-cap funds invest in market leaders such as Reliance Industries, HDFC Ltd, Infosys etc and hence experience low volatility.

Here’s a list of best large cap mutual funds in 2021.

Funds Rank MF Rating NAV 1Year 3Years 5Years Since Inception
Dsp Top 100 Equity Fund - Regular Plan - Growth 7 5 ₹282.49 43.73% 10.40% 10.64% 19.91%
Axis Bluechip Fund - Regular Growth 16 5 ₹42.40 40.17% 14.16% 15.90% 13.30%
Kotak Bluechip Fund - Growth 16 5 ₹345.75 47.03% 13.96% 13.19% 19.91%
Uti Mastershare Unit Scheme - Growth Plan 32 4 ₹177.67 48.65% 13.39% 13.38% 13.61%
Axis Bluechip Fund - Regular Idcw Reinvestment 55 4 ₹18.63 40.22% 13.34% 15.39% 13.09%
Iti Large Cap Fund Regular Plan Growth 61 4 ₹11.32 0.00% 0.00% 0.00% 13.21%
Kotak Bluechip Fund - Idcw Reinvestment 65 4 ₹44.63 47.03% 13.49% 12.87% 18.48%
Dsp Top 100 Equity Fund - Regular Plan - Idcw Payout 70 4 ₹22.40 43.73% 9.43% 10.06% 19.72%
Bnp Paribas Large Cap Fund Growth 95 4 ₹128.57 38.68% 14.07% 12.44% 16.36%
Mirae Asset Large Cap Fund - Regular - Growth 55 4 ₹72.33 45.45% 13.99% 14.98% 16.00%

Note: *Returns as of date 31st July 2021

Midcap mutual funds invest in stocks with market capitalisation between Rs 5,000 crores and Rs 20,000 crores. These are 101st to 250th companies as per market capitalisation. These companies are not yet established and hence midcap mutual funds carry high risk. They are very volatile and suitable for only aggressive investors with long-term horizon.

Here’s a list of best midcap mutual funds in 2021.

Funds Rank MF Rating NAV 1Year 3Years 5Years Since Inception
Dsp Midcap Fund - Regular Plan - Growth 40 4 ₹87.44 57.03% 18.4% 16.38% 15.91%
Axis Mid Cap Fund - Regular Growth Plan - Growth 43 3 ₹62.53 62.2% 21.73% 19.59% 19.23%
L&t Midcap Fund Growth 68 4 ₹197.94 62.39% 13.58% 15.91% 19.26%
Dsp Midcap Fund - Regular Plan - Idcw Reinvestment 108 4 ₹25.95 57.02% 17.36% 15.77% 15.7%
Axis Mid Cap Fund - Regular Idcw Reinvestment 119 4 ₹33.51 62.17% 20.87% 19.08% 18.98%

Note: *Returns as of date 20th July 2021

Small cap mutual funds invest in stocks with market capitalisation of less than Rs 5,000 crores. These are 251st onwards companies as per market capitalisation. These are mostly start-ups and hence are extremely risky. They experience very high volatility. Only very aggressive investors with 10+years investment horizon should invest in small cap funds.

Here’s a list of best small cap mutual funds in 2021.

Funds Rank MF Rating NAV 1Year 3Years 5Years Since Inception
Sbi Small Cap Fund Regular Growth 199 3 ₹95.26 90.12% 23.97% 22.32% 20.92%
Uti Small Cap Fund - Regular Growth Plan 307 3 ₹13.71 0.00% 0.00% 0.00% 37.05%
Sbi Small Cap Fund Regular Idcw 377 2 ₹56.28 90.12% 23.97% 22.32% 20.92%

Note: *Returns as of date 20th July 2021

Debt Mutual Funds:

Here, the pooled money is invested in fixed income instruments like:

These fixed income instruments can be issued by government or private and public sector companies. Debt funds are safer and less volatile than equity mutual funds. They earn a fixed rate of interest on their corpus and hence are suitable for conservative investors.

  • Bonds
  • Debentures
  • Zero Coupon Bonds
  • Commercial Papers (CPs)
  • Certificates of Deposits (CDs)
  • Non-Convertible Debentures (NCDs)
  • Money market instruments like Treasury Bills, CBLO etc.
  • Sovereign papers issued by the Government of India

Debt mutual funds can be further subdivided as:

Type of Debt Fund Maturity Period Example
Ultra short-term debt funds Less than 12 months Liquid funds, overnight funds, money market funds etc.
Short-term debt funds Less than 3 years Corporate bond funds, Dynamic bond funds
Medium-term debt funds Between 3 - 5 years Credit risk funds, medium-duration funds
Long term debt funds More than 5 years Gilt funds, all seasons bond funds etc.

Hybrid Mutual Funds:

Here the pooled money is invested in a mix of stocks, bonds and gold. The main idea is to get capital appreciation from equity portion and stability from debt or gold component. and fixed income instruments. Hybrid mutual funds are perfect for mutual fund beginners. It gives them a good first-time exposure to the stock markets. Depending upon the equity, debt and gold balance, there are seven types of hybrid mutual funds:

Aggressive Hybrid Fund invests 65% - 80% in equity shares and 20% -35% in debt instruments.

Conservative Hybrid Fund invests 75% - 90% in debt and 10% - 25% in equity shares.

Dynamic Asset Allocation Fund changes allocation dynamically as per market valuations. It can invest 100% in equity or 100% in debt.

Multi Asset Allocation Fund invests minimum 10% in each asset class equity, debt and gold.

Balanced Hybrid Fund invests minimum 40% in equity and 60% in debt.

Equity Savings Fund invests in equity stocks, debt and derivative instruments like futures. The fund can invest up to 100% in equity shares.

Arbitrage Funds are a unique type of hybrid fund as they hedge their cash position using futures contract. This means that the fund carries almost no risk.

Here’s a list of best hybrid mutual funds for 2021.

Funds Rank MF Rating NAV 1Year 3Years 5Years Since Inception
Idfc Balanced Advantage Fund Regular Plan - Growth 1 4 ₹17.29 20.99% 10.10% 9.38% 8.41%
Motilal Oswal Dynamic Fund - Regular Growth 1 5 ₹15.07 13.56% 7.56% 0.00% 8.89%
Boi Axa Arbitrage Fund- Regular Plan - Growth 1 5 ₹11.34 2.63% 4.09% 0.00% 4.15%
Uti Equity Savings Fund - Regular Growth Plan - Growth 1 4 ₹12.52 21.88% 0.00% 0.00% 8.09%
Motilal Oswal Equity Hybrid Fund-regular Plan Growth 1 5 ₹14.43 29.54% 0.00% 0.00% 13.74%
Motilal Oswal Multi Asset Fund Regular Growth 1 5 ₹10.62 0.00% 0.00% 0.00% 6.23%
Parag Parikh Conservative Hybrid Fund - Regular Plan Growth 1 4 ₹10.01 0.00% 0.00% 0.00% 0.44%
Uti Regular Savings Fund - Growth Plan 2 4 ₹48.14 17.79% 6.26% 7.23% 9.34%
Idbi Equity Savings Fund- Growth 2 4 ₹20.13 20.29% 8.01% 6.09% 6.98%
Canara Robeco Equity Hybrid Fund Regular Growth 2 5 ₹229.68 37.52% 15.34% 14.30% 11.63%

Note: *Returns as of date 20th July 2021

Each mutual fund type has a distinct investment objective and risk profile. Equity mutual funds are very risky. Debt mutual funds are comparatively less risky than equity funds. Hybrid mutual funds carry medium-risk.

Once the objective of the fund is decided, the fund manager then picks top companies for investment. This step is very critical. Proper stock selection is the backbone of a fund’s performance.

For example: In case of equity mutual funds, the fund manager will select top stocks for investment. These stocks can be large cap stocks , mid cap stocks , small cap stocks etc.

Once the segment is decided, the fund manager then divides the collected amount into smaller portions and invests across stocks or debt instruments. The process of dividing the investment amount and investing smaller portions in various stocks is known as ‘Diversification’ . Diversification helps in reducing overall portfolio risk.

Let us see how diversification works in mutual funds.

Suppose you wanted to invest ₹ 100. You have two options -

  • Invest the entire ₹ 100 in one company.
  • Invest ₹ 10 in 10 different companies.

There are more than 4,500 stocks in the market. What are the chances that you will end up selecting the best stock? It’s 1 in 4,500 or next to impossible.

But if you select 10 stocks, then there is a slightly higher chance that some of them might be best stocks.

To help improve their chances, fund managers invest in many stocks. So that even if one stock performs poorly, good performance of the remaining stocks can help them average the gains or losses.

So, diversification not only helps in spreading the risk, it also ensures that you maximise your profits.

Why Does the Value of Mutual Funds Change?

The NAV of equity mutual funds fluctuate when your fund manager buys and sells the underlying shares on the stock exchange.

There is a direct relationship between stock prices and the fund's NAV.

  • If share prices increase - your funds NAV will increase.
  • If share prices decrease - your funds NAV will decrease.

Are Mutual Funds Safe?

Every investor looks for safety while investing. Afterall, we are investing our hard-earned money. In this regard, mutual funds are quite misunderstood. Just because they have ‘fund’ in their name, people compare them with chit funds.

But you will be surprised to know that mutual funds are highly secured. In India, mutual funds are regulated by the Securities and Exchange Board of India (SEBI) . Additionally, the Association of Mutual Funds in India ( AMFI ) also regulates and monitors the mutual fund industry.

SEBI’s aim is to safeguard the interest of common investors. So, in terms of your money vanishing overnight, be rest assured that this will never happen. Unit Trust of India (UTI) is the first mutual fund launched in India in 1963. In the last 58 years, no mutual fund company has vanished with investors’ money.

So, mutual funds are highly secured.

What are the Advantages of Mutual Funds? - Why Should you Invest in Mutual Funds?

Mutual Funds are the perfect investment option for investors with little knowledge or experience of the stock markets. The main advantages of mutual funds are:

  1. Professionally Managed: The biggest advantage of mutual funds is that they are professionally managed by expert fund managers. These managers have dedicated research teams which discover lucrative investment opportunities.

    Fund managers take investment decisions on behalf of investors. In return, they charge fund management fees. This fee is adjusted against the fund’s NAV. The aim of the fund manager is to beat the fund’s benchmark and generate superior returns for unitholders.

  2. Diversification: Mutual funds divide and invest the pooled amount into various companies. By doing this, they reduce their overall risk while increasing their profit possibilities. Diversification helps investors participate in the growth of multiple companies with a single fund.

  3. Highly Liquid: Liquidity refers to how quickly you can sell an investment for cash.

    Bases on liquidity, mutual funds are of two types -
    • Open ended funds
    • Close ended funds

    Open ended funds can be bought and sold anytime. Close-ended funds can be bought only during a specific time period. Fixed Maturity Plan (FMP) is a close ended fund.

    Open ended mutual funds are highly liquid. You can sell your units within 1 day of investment also. But in such cases, exit load and taxation is applicable. More on this later.

    Majority of mutual fund schemes do not have a compulsory lock-in period (except Equity linked savings schemes , ELSS and FMP).

    High liquidity ensures that you can redeem your mutual fund units anytime in case of any emergencies.
  4. Convenient: Mutual Funds are highly convenient. Investors can invest the entire capital at one go known as lumpsum investing. Or they can invest small amounts every month, known as Systematic Investment Plan ( SIP ).

    Lumpsum investing is more suited to investors who can time the market. Whereas SIP is perfect for retail investors. SIP helps in creating investment discipline as a fixed amount is automatically deducted every month on a pre decided date.

  5. Affordable: One of the biggest advantages of mutual funds is that they are very affordable. You can start investing in mutual funds with as little as ₹ 500 per month via SIP. In case of lumpsum investing, the minimum investment amount varies between ₹ 1,000 - ₹ 5,000.
  6. High Variety: There are more than 29 different types of mutual funds in India. There are distinct mutual fund schemes to match various types of risk profiles and investment objectives.

What are the Different Types of Mutual Funds In India?

As mentioned earlier, there are more than 29 different types of mutual funds in India. These 29 types of mutual funds can be categorised into 3 broad types:

  • Equity Mutual Funds: Equity mutual funds invest in ‘stocks’ of companies. These companies can be large cap, midcap or small cap. Equity mutual funds can be actively managed or passively managed.
  • Debt Mutual Funds: Debt mutual funds invest in securities issued by private and public companies as well as the government. Debt mutual funds can be close-ended like FMPs or open-ended.
  • Hybrid Mutual Funds: Hybrid mutual funds invest in both stocks and debt instruments. The mix of equity and debt can change as per the scheme’s investment objectives. Aggressive hybrid funds invest 80% in stocks. Conservative hybrid funds invest more than 65% in debt instruments.

The below chart shows the various types of mutual funds in India . We will discuss these types of mutual funds in later sections.

what are mutual funds

What are the Different Options In Mutual Funds?

Another reason why mutual funds are popular is because they offer both growth and regular income.

There are two types of options in mutual funds:

  • Growth Option
  • Dividend Option

Growth Option: In the growth option, you do not get regular income. Instead, all the profits are reinvested back in the fund itself.

For example: Imagine you invested ₹ 100 on 1st April 2020. On 1st December 2020, the market value of your investment is ₹ 150. The ₹ 50 profit is your ‘capital appreciation’. This Rs 50 is not paid out to you. Instead it remains in the fund itself.

Growth option is perfect for long term mutual fund investors. Mutual fund beginners should select growth option to earn higher capital appreciation.

Dividend Option: In the dividend option profits are paid to you at regular intervals. The intervals can be weekly, monthly, quarterly or yearly.

In the above example, if you selected the dividend option then the profit (₹ 50) will be given to you as per your selected frequency. Dividend option is perfect for senior citizens or retirees who need regular income.

How are Mutual Funds Taxed?

Mutual funds are taxed as per the assets that they invest in. Mutual fund taxation is of two types:

  • Equity Taxation: Equity funds and aggressive hybrid funds follow equity taxation. The holding period for equity taxation is 12 months (1 year).
    • If you redeem before 12 months, your gains or profits are called short term capital gains (STCG). STCG tax on mutual funds is 15%.
    • If you redeem after 12 months, your gains are known as long term capital gains (LTCG). LTCG tax on mutual funds is 10% above Rs 1 Lakh.
  • Debt Taxation: Debt funds, liquid funds and conservative hybrid funds follow debt taxation. The holding period for debt taxation is 36 months (3 years)
    • If you redeem before 3 years, your STCG will be added to your income and taxed as per income tax slab.
    • If you redeem after 3 years, your LTCG tax will be 20% with indexation.

Here is a snapshot of how equity and debt mutual funds are taxed. We will discuss mutual fund taxation in detail in later sections.

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Shortlist the funds you want to invest in.

Register SIP or make lumpsum investments in your favourite mutual fund and you’re done!

what are mutual funds

Why Should you Invest In Mutual Funds?

  • Did you know that about ₹ 79 million of the mutual fund industry’s AUM is held with retail investors?
  • Or that the average AUM of mutual fund schemes has grown 3 times in the last 5 years?!

Yes, the above facts prove that mutual funds are the preferred investment option for retail investors.

Mutual funds are perfect for retail investors who do not have the time or resources to study the market. They are professionally managed and generate superior returns than other investment options.

The below charts show the performance of different types of mutual fund categories over a 10 year period.

10 Year Performance of Equity Funds

what are mutual funds

10-Years Performance of Debt Funds

what are mutual funds

10-Years Performance of Hybrid Funds

what are mutual funds

So, there you go. You get superior returns, expert management and affordability all packed into 1 box - The mutual fund box.

We encourage you to explore mutual funds, their types and how they help you grow wealth by opening a FREE 玩加电竞 account.

what are mutual funds

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Frequently Asked Questions by investors:
What is mutual fund?
A mutual fund is an investment vehicle where money is collected from lakhs of investors. This pool of money is then used to buy stocks (equity funds) or bonds (debt funds) or both (hybrid funds). There are more than 29 different types of mutual funds in India . They are managed by expert fund managers. The profits and losses on investment (shares or bonds) is shared by all unitholders (investors) equally. Hence the name mutual fund. Watch our detailed video on what is a mutual fund .
Are mutual funds safe?
All mutual funds in India are strictly governed by the Securities and Exchange Board of India (SEBI). The first mutual fund in India was launched in 1963. Since then, there has never been an instance where asset management companies (AMC) have looted investors money. So, yes, mutual funds are safe. But remember that they are linked to the market hence they carry market risk and their prices increase or decrease on a daily basis. Learn everything about the risks in mutual funds .
Are mutual fund returns tax free?
No, mutual fund returns are not tax free. The tax payable depends upon which type of mutual fund it is.
  • For equity funds, the holding period is 12 months. If you sell before 12 months, a short-term capital gains (STCG) tax of 15% is applicable. If you sell after 12 months, a long-term capital gains (LTCG) tax of 10% above Rs 1 Lakh is applicable.
  • For debt funds, the holding period is 36 months. If you sell before 36 months, you need to pay a STCG tax as per your income tax slab. If you sell after 36 months, you have to pay LTCG tax @20% with indexation.
Read everything about taxation in mutual funds here.
Do mutual funds help you save tax?
Yes, Equity Linked Savings Scheme (ELSS) helps in saving tax under section 80C of the Income Tax Act, 1961. You can claim deduction up to Rs 1.5 Lakh by investing in ELSS. However, ELSS funds have a compulsory lock-in period of 3 years. Find list of best ELSS funds for 2021 .
Can mutual fund be sold anytime?
Open-ended mutual funds can be sold or redeemed anytime. However, close-ended funds like fixed maturity plans (FMPs) can be redeemed on maturity only. Hence, it is recommended to invest in only open-ended funds. Find list of best equity mutual funds for 2021 .
How does mutual fund work?
The following parties are involved in the working of a mutual fund:
  • Investors
  • Fund Managers
  • Asset Management Company (AMC)
  • Custodians
  • Registrars & Transfer Agents (RTAs)
  • SEBI (official watchdog of Indian markets)
An AMC creates a mutual fund house after getting approval from SEBI. It then appoints fund managers who are experts in the field of investment and finance.
These fund managers then create schemes based on different investment objectives. Equity funds will invest in shares of large-cap, midcap or small-cap funds etc. Debt funds can invest in private bonds or government bonds (gilt).
Lakhs of investors having the same investment objective subscribe to a scheme and are allotted units at a specific net asset value (NAV).
This NAV keeps on changing as per market fluctuations. All the assets (shares/bonds) owned by the fund are maintained by a custodian. All transfers arising out of sales and purchases is maintained with RTAs.
So, a mutual fund works like a well-oiled machine. Learn how a mutual fund works .
What is NAV?
NAV stands for Net Asset Value. It is the price at which units are allotted to mutual fund investors. It is basically the cost price of a mutual fund’s units. It increases or decreases as per market fluctuations. The formula for calculating NAV = Total Assets – Total Liabilities / Total Outstanding units.
Where do mutual funds invest money?
Equity mutual funds will buy shares of companies listed on the exchange. Debt mutual funds will purchase bonds, debentures, treasury bills etc. Hybrid mutual funds will invest in both shares and bonds.
Why mutual fund is better than FD?
Mutual funds are superior to bank FDs as they offer higher inflation-adjusted returns. They are also more tax efficient and provide the benefit of indexation which is not available in FDs. Mutual funds do not have a lock-in period like bank FDs. Learn why mutual funds are better than bank FDs .
Which mutual fund is best for short-term?
Ideally, investors should invest in debt funds for short-term financial goals arising in less than three years. For short-term goals, investors can consider the following debt mutual funds:
  • If goal is in less than three months – Liquid funds or overnight funds.
  • If goal is in three months to one year – Ultra-short-term or money market funds.
  • If goal is in less than three years – corporate bond funds, banking and PSU funds, dynamic bond funds etc.
Here’s a list of best liquid funds in India for short-term goals.
Can you lose money in mutual funds?
Yes, you can lose money in mutual funds as they are linked to the market. So, their values will fluctuate daily. The best way to minimise your loss is to invest in the absolute best mutual funds only. Find out if your mutual fund is best or worst using 玩加电竞 ’s SmartSwitch facility .
Who regulates mutual funds?
The Securities and Exchange Board of India (SEBI) regulates all mutual funds in India. They ensure ethical functioning of all market intermediaries…fund managers, advisors, AMCs, custodians and RTAs.
What is index fund?
An index fund is also a mutual fund that mirrors or copies a particular index. It can be S&P BSE Sensex, Nifty 50 etc. Hence the name indexfund. It is not actively managed. Here the fund manager’s only goal is to mirror the returns generated by the index. Index mutual funds have lowest expense ratios. Learn everything about index mutual funds in India .
What is large-cap mutual fund?
The fund manager of a large-cap mutual fund will invest in only large-cap stocks. These are stocks with market capitalisation above Rs 20,000 crores. They are 1st to 100th companies as per market capitalisation. Some of the top large-cap stocks are: Reliance Industries Ltd , State Bank of India , Infosys Ltd etc. Find list of best large-cap mutual funds for 2021 .
What is midcap mutual fund?
A midcap mutual fund will buy shares of companies between 101st and 250th as per market capitalisation. The market capitalisation of midcap companies is between Rs 5,000 – Rs 20,000 crores. Midcap funds are riskier than large cap funds and suitable for only aggressive investors. Find the list of best midcap mutual funds for 2021.
What is small cap mutual fund?
A small cap mutual fund will invest in small cap stocks. These are stocks which are 251st onwards as per market capitalisation. Their market capitalisation is below Rs 5,000 crores. They are extremely risky and suitable for only aggressive investors with long-term horizon. Find the list of best small cap mutual funds for 2021.
What is Debt fund?
A debt fund invests in fixed income instruments like bonds, debentures, non-convertible debentures (NCDs), zero coupon bonds, commercial papers, certificates of deposits etc. They are safer than equity funds and suitable for short-term goals. Find list of best debt funds for 2021 here .
What is Hybrid Mutual Fund?
A hybrid mutual fund invests in both equity shares and fixed income instruments. They are ideal for beginners who want to test the equity markets before going all in. There are seven types of hybrid funds – aggressive hybrid, conservative hybrid, arbitrage, equity savings, dynamic hybrid, multi-asset allocation and balanced advantage funds. Find list of best hybrid funds for 2021.
What is liquid fund?
Liquid fund is a type of debt fund which invests in fixed income instruments maturing in less than 91 days. They are highly stable as they invest in treasury bills, commercial papers and certificates of deposits issued by government or high credit rated companies. Here’s a list of best liquid mutual funds for 2021 .
What is SIP?
SIP stands for Systematic Investment Plan. It is a popular method of investing in mutual funds. Here a small amount is deducted every month on a prefixed date and invested in the mutual fund automatically. Mutual fund SIPs start from as little as Rs 500 per month. The biggest advantage of SIPs is that it helps in cost averaging. Learn basics of SIPs .
What is lumpsum investing?
Lumpsum is the opposite of SIP. Here you invest the entire investment amount at one go. Lumpsum investing should be done by experienced investors only as timing the market is very difficult. Read detailed article on lumpsum Vs SIP .
What is the difference between growth and dividend option?
In growth option, you do not receive any income as the gains are reinvested back into the fund itself. But in dividend option, you can opt to receive dividends. Growth option is suitable if your goal is wealth creation. Dividend option is suitable if you are a retiree or senior citizen or want regular income from your fund.
What is the best way of investing in mutual funds?
Majority of investors believe that SIP is the best way of investing in mutual funds. But this is false. The best way of investing in mutual funds is through SmartSIP . Here you invest in equity funds when markets are cheap and in debt funds when markets are expensive. Watch this video to learn how SmartSIP works .
How do you make money in mutual funds?
There are three ways to make money in mutual funds:
  • Capital appreciation
  • Dividend Income
  • Interest income from bonds and debentures
What is a good mutual fund to invest in?
A good mutual fund to invest in will have the following:
  • Superior performance against benchmark and peers
  • Low churning or turnover ratio
  • Low expense ratio
  • High quality stocks
  • Highest credit quality bonds and debt instruments
Find the list of good mutual funds to invest in 2021.
Can I get monthly income from mutual funds?
There is an option in mutual funds called dividend option. Here you can earn monthly dividends. However, do note that it is not compulsory for a fund to pay dividends. Hence, investors need to be careful and you should not invest in a poor-quality fund just because it pays dividends. Switch from poor-quality funds to superior funds in less than five minutes with 玩加电竞 ’s SmartSwitch. Watch this video to learn how SmartSwitch works .
What is the advantage of mutual funds?
Mutual funds are one of the best investment options for investors. It provides the following benefits:
  • Professional Management
  • Diversification
  • Strictly Regulated and Safe
  • Affordable
  • Access to multiple stocks with less capital
Learn advantages and disadvantages of mutual funds in India.
What is expense ratio in mutual funds?
Expense ratio is a fee charged by the fund house for managing investors’ money. It is used to pay the fund manager’s salary and other fund expenses. Expense ratio and a fund’s return are inversely related. If expense ratio is high, the fund’s returns will be low. Hence investors must pay close attention to expense ratio while investing in a fund.
What is exit load in mutual funds?
Exit load is a penalty imposed by fund houses if you exit from a scheme before a specific period of time. Equity funds have an exit load of up to 1 year. Liquid funds have exit load of 7 days. Overnight debt funds have no exit load.
How to invest in mutual funds?
Follow this four-step approach to invest in mutual funds:
  • Open a FREE 玩加电竞 account .
  • Complete your Know Your Client (KYC) formalities.
  • Select which mutual fund you want to invest in. Here’s a list of the 10 best mutual funds in India for 2021.
  • Select lumpsum or SIP and invest! That’s it. Its that simple to invest in mutual funds.

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