Today, every market has some risk attributed to it, but making smart decisions can save you.
Indians believe in the safe investment of money, so in most cases, they prefer FD, Post
Recurring, or Bonds as a means of safer investment. But direct investment is considered
riskier as compared to mutual funds. Yes, you heard it right! In fact, as per the report by the
Association of Mutual Funds in India, mutual funds advanced fourfold to INR 25.49 trillion
over the last decade. This depicts the growing popularity of Mutual funds in India.
Mutual Funds refer to the type of investment consisting of the holdings of stock, bonds, and
various securities. It gets generally divided into diverse branches of securities based on the
type of returns and investment objectives. In fact, the mutual fund has a liquid fund, which
means that it offers more liquidity as compared to other bank recurring deposits and savings
schemes.
Types of Mutual Funds
Prior to putting investment into mutual funds, it is pivotal to know the types of mutual funds
available, and the benefits attached to them. There are numerous sorts of mutual funds
accessible. Probably the most well-known and fundamental ones are as follows-
● Equity Fund- Equity funds are those mutual funds that tend to invest in stocks. In
other words, you invest through Systematic Investment Plan (SIP), and it influencesyour Net Asset Value (NAV). You can use various types of equity funds like large-cap,
mid-cap, small-cap stocks.
● Bond fund- It refers to those funds that get invested in debt instruments issued by
Government and Corporations. Bond funds serve to provide income in the form of
dividends.
● Balanced fund- When in a single portfolio, you find stock components, a bond
component, and in some cases, money components, it gets referred to as balanced
funds. This type of mutual fund is most suitable for diversified investment solutions.
● Value fund- A value fund refers to the fund that follows a value investing plan and
requires investment in stocks that have undervalued prices. Such funds are
associated with high-growth prospects, and focus on exploiting market inefficiencies.
● Thematic fund- As the name suggests, thematic funds refer to the equity mutual
funds associated with investing in stocks bound to a theme. In other words, these
funds are more broad-based as they segregate companies by theme or idea.
Large-cap, Mid- Cap, Small Cap Mutual Funds: Which one is best?
Mutual funds investment get viewed as the best means to beat inflation over a period of
time and earn some handsome amount. Ordinarily, there are various mutual funds segments
that you need to choose based on your motive, risk, and returns.
To start with, let us explain to you with the help of the latest guidelines from SEBI. A
large-cap fund alludes to those investments done with the companies with large market
capitalisation. Since these large-cap stocks deal in big companies with large businesses, they
are also called blue chip stocks. One can find information about these companies over the
internet, or in various publications. Mid-Cap funds state the investment in mid-sized
companies that are still developing. At the same time, small-cap funds refer to the
investment in small companies with low market capitalisation. Large-cap fund investments
are reliable and stable as compared to small or mid-cap investments.
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Life insurance (endowment plans) Gold Vs Mutual fund-SIP
Life insurance gold refers to the protection scheme that can help you to secure the financial
future of your family and loved ones. Indeed, life insurance helps to safeguard a financial
portfolio and offers a plethora of benefits. But it is not considered a good source of
investment as it is not only heavy in the pocket, but also does not guarantee a high return as
compared to mutual funds.
On the other hand, with the help of a Systematic Investment Plan (SIP), you can place some
fixed denominations in the form of mutual funds every month. This investment plan also
offers flexibility. For example, in the future, if you want to increase the investment to get
increased returns, you have the flexibility to amplify the SIP amount at your convenience.
This process is called SIP Top Up. Eventually, you can achieve higher returns.
Benefits of Mutual Funds
Now let us quickly hover to the some of the main benefits of mutual funds for more clarity
and better understanding -
● Through mutual funds, your money can be effectively managed by professional
experts. There are fewer chances of financial leakage.
● Investing in mutual funds offers you the opportunity to invest your funds in various
securities in both national and international markets, which otherwise remain
unchannelised.
● Mutual Funds also render economies of scale as there is no specific amount to start
with.
Conclusion
In a nutshell, mutual funds are the best way to channelise your funds and reap leverages
over other investment options. Moreover, mutual fund companies are as safe as banks. Yes,
now we can say Mutual Fund hi Sahi Hai.
Need more guidance? We at JK Investment aim to provide our clients with the best of
services and customised financial solutions to their needs. After all, we are one of the
leading financial service providers & distributors. Visit our website to learn more.
