About Mutual Funds
A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. It is called a ‘mutual’ fund because all risks, rewards, gains or losses pertaining to, or arising from, the investments made out of this savings pool are shared by all investors in proportion to their contributions.
How to pick a suitable Mutual Fund category?
Your fund selection should be based on an assessment of your risk appetite and return expectation. If you can handle high risks with high returns, you can select an equity-based fund, but if you’re not comfortable with risk, choose a debt fund.
How are the returns on Mutual Funds calculated?
The return on mutual funds is calculated on the basis of its prevailing Net Asset Value (NAV). Suppose, you have invested Rs 10000 when the fund’s NAV was Rs 10 and you had 1000 units. If the NAV increases to 12, your investment will grow from Rs 10K to Rs 12K.
What is a SIP (Systematic Investment Plan)?
A Systematic Investment Plan or SIP is a smart and hassle-free mode for investing money in mutual funds. SIP allows you to invest a certain pre-determined amount at a regular interval (weekly, monthly, quarterly, etc.).
Who can invest in mutual funds in India?
Mutual funds are open to a wide range of investors including Resident Individuals, NRIs, PIOs, HUFs, Companies, Partnership Firms, Trusts, Cooperative Societies, Banking and Non-Banking Financial Institutions, registered FIIs, QFIs etc.
What are different types of mutual funds?
Mutual funds are divided based on the maturity period of the fund:
- Open-ended funds: No fix maturity period, you can invest or exit anytime
- Close-ended funds: The tenure is fixed and one can invest in a specific period
- Interval funds: It is a combination of open and close-ended funds