A mutual fund is a professionally managed investment scheme that polls a group of investor’s funds and invests them in stocks, bonds, and other securities. These funds are typically handled by Asset Management Companies (AMC). A fund manager is chosen by the AMC to invest and manage the pooled funds.
Investors can purchase mutual fund “units”, which essentially represent their ownership stake in a given scheme. These units can be purchased or redeemed at the current Net Asset Value (NAV) of the fund. According to the fund’s holdings, these NAVs are subject to fluctuation. All the mutual funds are registered with SEBI. They operate within the parameters of strict regulations designed to safeguard the investor’s interests.
The Advantages Of Mutual Funds
- Liquidity: The most significant advantage of investing in a mutual fund is the ability to redeem units at any time. Mutual Funds, unlike fixed deposits, allow for flexible withdrawals, however, issues such as the pre-exit penalty and exit load must be considered.
- Diversification: Diversification lowers the risk associated with creating a portfolio, thus lowering the risk for the investor. The fund manager spreads the investment across stocks of companies across various industries and different sectors. In this way, when one asset class doesn’t perform, the other sectors can compensate to avoid a loss for investors.
- Expert Management: It’s possible that a novice investor lacks understanding or information on where and how to invest. Mutual funds are operated and managed by professionals. The professionals gather funds from clients and allocate them among various securities, enabling the investors to make a profit. The expert monitors timely exit and entry and manages any problems. This is one of the most significant benefits of mutual funds. You can now invest in mutual funds easily by using Kuvera mutual fund.
- Investment in Smaller Amounts: One of the most significant benefits of mutual funds is their flexibility. Investors do not need to contribute a large sum of money to invest in a mutual fund. Investing can be done in accordance with cash flow. If investors receive a monthly salary, they can adopt a Systematic Investment Plan (SIP). Depending on the budget and convenience, a fixed amount is invested through a SIP either monthly or quarterly.
Different Types Of Mutual Fund Schemes
- Schemes according to Maturity Time: Depending on its maturity period, a mutual fund scheme can be divided into two categories: open-ended schemes and close-ended schemes.
- Open-ended Fund/Scheme: A fund or plan that is continuously open to subscription and repurchase and is known as an open-ended fund or scheme. There is no set maturity time for these schemes. Investors can easily purchase and sell units at the Net Asset Value (NAV) per unit, which is announced every day.
- Close-ended scheme: A close-ended fund or scheme has a set maturity period, such as three to five years. The fund is open for subscription only during a specified period at the time of the launch of the scheme. At the time of the new fund offer, investors have the option of investing in the scheme. Afterward, they can purchase or sell the scheme’s units on the stock markets where they are listed.
- Schemes according to Investment Objective: Depending on its investment objective, a scheme can also be categorized as a growth plan, an income plan, or a balanced plan. These schemes can be categorized mainly as follows:
- Equity Oriented Scheme: Growth funds seek to provide capital appreciation in the medium to long term. Typically, they invest a sizable portion of their corpus in equities. These funds are comparatively risky.
- Debt Oriented Scheme: The objective of debt funds is to typically provide investors with a regular and stable return in comparison to equity funds. The majority of the time, these schemes invest in fixed income products such as bonds, corporate debentures, government securities, and money market instruments. These funds are less risky than equity-based schemes.
- Balanced/Hybrid Scheme: As they invest in both equities and fixed income securities in the ratio specified in their offer documents, balanced schemes seek to provide both growth and consistent income. Investors searching for moderate growth should choose these. They usually invest between 40 and 60 % in equity and debt instruments.
- Money Market or Liquid Schemes: These are also income schemes whose objective is to provide easy liquidity, capital preservation, and a moderate income. These schemes invest only in short-term instruments such as treasury bills, certificates of deposit, commercial paper, inter-bank call money, government securities, etc
- Gilt Funds: These funds only invest in government securities. Government securities have no default risk.
- Index Funds: Index Funds replicate the portfolio of a specific index, such as the BSE Sensex, NSE 50 index (Nifty), etc. These schemes invest in the securities at the same weightage comprising an index.
How To Invest In Mutual Funds Using Kuvera
Step 1: Sign Up on Mutual Fund App or visit the Kuvera website
Step 2: Register on the platform by completing the KYC process.
Step 3:Visit the Invest section to proceed further with the online mutual fund investment process.
Step 4: Select the Mutual Fund option for the complete list.
Step 4: Select and compare the various Mutual Funds options mentioned there to begin your investment journey with Kuvera.