What is Mutual funds | Mutual Fund for Beginners | how to invest in it
Hello Friends, today's blog is going to be educational and related to your personal finance. In this blog, I will educate you regarding mutual funds. What are mutual funds? How to invest in it? Basically, all the necessary information regarding it, is a common man or a beginner investor, all the information you will get in this blog.
ALL ABOUT MUTUAL FUNDS
Let's start. Friends, every month when your salary is credited then you keep some part of that salary as savings. You keep some money for your later use, maybe for an emergency or if you want to be the house or car and you save for that. so what are the ways to save? One simple way is that you keep your salary as it is in the bank and it gets collected. It's a very bad way friends because such money loses their value Inflation is increasing in our country and due to that the price of the commodities is increasing too. So, the value of your money keeps decreasing every year by 4-5% according to the inflation rate. People invest the money so that they don't lose their value kept just lying. There are different places to invest in.
Our country has mainly 4 places for investment. No. 1 is a savings account, No. 2 is FD or Fixed Deposit, No. 3 is Gold or jewelry People buy gold or jewelry with their money and No 4. is Real estate. People buy properties, or land, or house. Some people who want to take more risks also invest in the stock market which is another way to invest your money. If you don't know about the stock market and want to know about how it works so you can click this link below
https://www.freeonlineearning.in/2020/06/what-is-stock-market-how-it-works.html
Every Investment has 3 things, Return, risk, and time. Return means how much percent of profit are you earning through the investment, this is normally seen in percentage. if our inflation rate is 4% then you should see that your profit return is more than at least 4 % Otherwise there is no point of investment if you have put your money and the value didn't increase. because the inflation rate is also increasing
Risk means how risky it is to invest, what is the chance of losing all your money in that investment. What is the chance of going in loss after investing there? and time means for how long are you investing. so the basic risk here is that if the time is more, the is more then the returns will also be more. If you want more return percentage on your investment then you will have to take more risk and should invest for a longer period
WHICH TYPE OF INVESTMENT ARE BEST?
Saving accounts have the minimum risk and there is no restriction too. You can save or take the money out at any time. But the return we get here is also very less, only 4% whereas our inflation rate in the last few years has been 4-5% Fixed deposit is also a less risky option but it has a time limit before that we can't take the money out. hence the return is also a bit more, somewhat 7-8% Gold and jewelry these days have a significant risk, their prices fluctuate a lot
If you are going to see this history then you will know that until 2012 the prices were consistently increasing If you would have invested before 2012 then you would have got a good return here. But after 2012 there have been a lot of ups and downs but they have maintained a level, hence there's not a much profit. Investment in the properties and real investment has low to moderate risk I would say You can see India's housing prices in the last few years. It has come up and down a lot. In the quarter or March 2011, it has touched the return rates of 30%and in March 2018 the latest quarter then it gives just 5% return rates. One of the disadvantages of investing in housing is that it needs a lot of capital, you need to have lacs and crores of rupees to invest. So this is a disadvantage.
You might have heard about stock market friends, you can get a lot of returns here but also loss. The risk of investing in the stock market depends on the stock where you are investing. You need to have a good knowledge of the performances of the stock and how does the stock market work basically. you shouldn't be investing here if you don't have this knowledge. So these are a few main types of investments that I have told you but there are some other types too. like Government bonds, corporate bonds, we have cryptocurrency to these days, people also invest in bitcoins
A general well-known advice is that friends you should never invest your money only in one place. You should invest in different places so that if there's any crash then you will not have to bear the overall loss. It's a very less chance of everything crashing altogether like, gold, properties, and even stock market. as this happens were rarely Chances are that if one thing crashes then you can get profit from the other. This is called diversification, you have to invest in different places.
WHAT ARE MUTUAL FUNDS?
Mutual funds are a special kind of investment through which you can invest in different types together. you can do a diversifies investment by investing in one place. Asset Management Company starts mutual funds. Basically, you give your money to Asset Management Company and many people like you do so. that company invests all the money collectively in different places. They have appointed experts and with their suggestion, they invest the money. They invest money at different places and the return rate they get collectively from these different places out of that some small percent of 1-2% is kept as a profit by the Asset company and the rest you get back as per that return rate. HDFC, HSBC, ICICI, Aditya Birla, Reliance, TATA, these are the few examples of companies and banks who have started their own asset management company. All companies start different kinds of mutual funds in large numbers.
For example, ICICI has started more than 1200 mutual funds. So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing in. mutual funds can give a return rate of 4% and also of more than 30% too. It can be of zero risks and also of high risk too. Because all this depends on where the asset management company is investing your money. If that company is investing in stocks then it will be riskier and you will get more returns and if it's investing in the government bonds then it will be less risky.
TYPES OF MUTUAL FUNDS
Different types of Mutual funds depend based on the investment done by AMC people. We can divide this into the 3 categories: Equity mutual funds, Debt Mutual Funds, and Hybrid Mutual funds
In Equity Mutual Funds, your money will be invested in the stock market. So naturally in this type of Mutual funds generally the risk is more and also the return. In the stock market on which kind of company are you investing, if it's a big company then it's called Large Cap Equity Funds If it's a small company then it's called Small-cap and in the same way Mid Cap equity Funds. Big company doesn't have many risks as compared to the smaller ones but big companies won't have growth rate as high as it can be for the smaller companies. So risk and return b0th are less in big companies. ICICI prudential blue-chip fund is an example of a large-cap equity fund. If you invest here for a year then after a year your expected return is 11.3% but if you invest for 5 years then your expected return can be 19.7%. That before today in the last 5-10 years what has been the performance of the mutual funds, what's the growth and it gives you the number based on its average growth.
. The next type is the Equity Linked Saving scheme that is ELSS, this is a special type of Equity fund where you can save our tax. You can save the tax on its profit. The fund manager purposely invests in such places where there's a high return and also has high risk. IDFC Tax advantage is an example of ELSS funds with the expected returns of 11.3% within a year. If you scroll down and click on other plans and details then you will get the details of tax too. that how much can you save and much you will have to pay. In this detail you can see for all the mutual funds if you scroll down and click then you will know the amount of tax that you will have to pay. The next type is Sector Mutual Funds, here specifically such companies are invested in which belongs to a big sector like the Agriculture sector All the companies which are under the agriculture sector, they are invested on. A logistics or transport sector, so there. One example of this is UTI transportation and logistics funds. so the investment is done in that sector. these funds are riskier since all the investment is done in one sector so if the sector is going down everything depends on that.
The last type of equity fund that I would want to tell you is an Index fund. Index Funds are passively Managed funds that are no agent of AMC is looking at where to invest the money here These are passively managed that is according to the market's rate's up and downs they too go up and down. looking at the price of Sensex and Nifty it varies. Now let's look at the second category of the mutual funds' friends, that is Debt Mutual Funds. these are those mutual funds that are invested in the debt instruments.
Debts instruments are bonds, debenture, certificates of deposits now these things are exactly what you can read it for yourselves If I keep telling all this then the video will go longer, I will tell you what are bonds Sometime if the Government needs money and it's not getting that through the budget then the government borrows money from the people. and take loans from the people. It is called bonds You can invest here, give to the government and the government will return you the money after a fixed interest. Now debt mutual funds are of various kinds, let's first talk about liquid funds Liquid funds are those mutual funds which can be easily and quickly converted into cash. Liquid means that actually, It's not the liquid to drink. In economics, the liquid is something that can be easily converted into cash. So this thing can be converted into cash within a day or two. But it has a very low risk, such low that you can basically consider this as an alternative to a savings account
. Asset liquid fund is one such example where you will get the return of 7.1% in a year Here you can see in the graph how consistent is its growth so this can show how less is the risk here. for the last 5 years, it's increasing slowly with this percentage.
The next type is Gilt Funds, these are those funds where Investments are done on the Government issued bonds. So technically it has zero risks because it's never possible for the Government to not return your money. Mostly the interest rate can fluctuate. The next type is Fixed Maturity plans and this can be considered as an alternative to Fixed deposits, FD friends. because it has very low risk just like FD and it is done for a fixed time. For a specific time investment is done here and you can't take the money before that. So these are the few main types of Debt funds there are more like the Junk Bond scheme.
The third category of mutual funds is Hybrid Mutual Funds friends, basically its a mixture of debt and equity mutual funds. Some people want to invest in the stock market but don't want to invest all the money there and also invest some amount in the Debt instruments., so hybrid mutual funds are for them If most of the money is invested in a Debt fund then it will be called as the Balanced savings Funds Approximately the ratio is 70:30 that means 705 of your money is at the low-risk debt funds and 30% is in the equity funds. and if it's the other way, 70% is in the equity funds at a higher risk, then it is called a balanced advantage fund. and Hybrid mutual funds to have different types like arbitrage funds but friends I feel I have given a lot of information and knowledge to you Now I leave it to you, go ahead and research yourself on further kinds of mutual funds and which one is better for you.
The biggest advantage of mutual funds in comparison to other investments is that it is already diversified. Your risk gets very low due to diversification. because you are not investing in one place so if one thing crashes so it won't affect your money. So in comparison to the stock market, gold, real estate, mutual funds are less risky however the exact risk depends on the mutual fund that you are investing in. One more good advantage is that it is affordable, you don't have to invest a big amount altogether You can use SIP and invest a small amount every month. and all the investment of the mutual funds, friends is done by a professional expert or a fund manager who decided where to invest and where to not. This you don't need to so it's again a big advantage that an expert is working for you. But friends this mutual funds has a disadvantage too. If you are giving it to an unknown person, you don't know how it's going to perform. however, he is an expert but you can't trust 100% that an expert will be right all the time.
But the biggest disadvantage that used to be for the mutual funds earlier is that the agents used to take a lot of commissions for investing in the mutual funds. They say that gives us the money we will invest for you in the mutual funds and deduct a lot of commissions for themselves. now disadvantage is not possible friends due to the smartphone apps who can do this for you Like this GROWW app where there is no hidden charges and doesn't deduct it's hidden charges, I'm talking specifically about this as I have not seen the other apps and here there no commission or charges getting deducted, just the asset management company who takes their part. and that is going to be there if you invest in any mutual funds For transparency
ALL ABOUT MUTUAL FUNDS
Let's start. Friends, every month when your salary is credited then you keep some part of that salary as savings. You keep some money for your later use, maybe for an emergency or if you want to be the house or car and you save for that. so what are the ways to save? One simple way is that you keep your salary as it is in the bank and it gets collected. It's a very bad way friends because such money loses their value Inflation is increasing in our country and due to that the price of the commodities is increasing too. So, the value of your money keeps decreasing every year by 4-5% according to the inflation rate. People invest the money so that they don't lose their value kept just lying. There are different places to invest in.
Our country has mainly 4 places for investment. No. 1 is a savings account, No. 2 is FD or Fixed Deposit, No. 3 is Gold or jewelry People buy gold or jewelry with their money and No 4. is Real estate. People buy properties, or land, or house. Some people who want to take more risks also invest in the stock market which is another way to invest your money. If you don't know about the stock market and want to know about how it works so you can click this link below
https://www.freeonlineearning.in/2020/06/what-is-stock-market-how-it-works.html
Every Investment has 3 things, Return, risk, and time. Return means how much percent of profit are you earning through the investment, this is normally seen in percentage. if our inflation rate is 4% then you should see that your profit return is more than at least 4 % Otherwise there is no point of investment if you have put your money and the value didn't increase. because the inflation rate is also increasing
Risk means how risky it is to invest, what is the chance of losing all your money in that investment. What is the chance of going in loss after investing there? and time means for how long are you investing. so the basic risk here is that if the time is more, the is more then the returns will also be more. If you want more return percentage on your investment then you will have to take more risk and should invest for a longer period
WHICH TYPE OF INVESTMENT ARE BEST?
Saving accounts have the minimum risk and there is no restriction too. You can save or take the money out at any time. But the return we get here is also very less, only 4% whereas our inflation rate in the last few years has been 4-5% Fixed deposit is also a less risky option but it has a time limit before that we can't take the money out. hence the return is also a bit more, somewhat 7-8% Gold and jewelry these days have a significant risk, their prices fluctuate a lot
If you are going to see this history then you will know that until 2012 the prices were consistently increasing If you would have invested before 2012 then you would have got a good return here. But after 2012 there have been a lot of ups and downs but they have maintained a level, hence there's not a much profit. Investment in the properties and real investment has low to moderate risk I would say You can see India's housing prices in the last few years. It has come up and down a lot. In the quarter or March 2011, it has touched the return rates of 30%and in March 2018 the latest quarter then it gives just 5% return rates. One of the disadvantages of investing in housing is that it needs a lot of capital, you need to have lacs and crores of rupees to invest. So this is a disadvantage.
You might have heard about stock market friends, you can get a lot of returns here but also loss. The risk of investing in the stock market depends on the stock where you are investing. You need to have a good knowledge of the performances of the stock and how does the stock market work basically. you shouldn't be investing here if you don't have this knowledge. So these are a few main types of investments that I have told you but there are some other types too. like Government bonds, corporate bonds, we have cryptocurrency to these days, people also invest in bitcoins
A general well-known advice is that friends you should never invest your money only in one place. You should invest in different places so that if there's any crash then you will not have to bear the overall loss. It's a very less chance of everything crashing altogether like, gold, properties, and even stock market. as this happens were rarely Chances are that if one thing crashes then you can get profit from the other. This is called diversification, you have to invest in different places.
WHAT ARE MUTUAL FUNDS?
Mutual funds are a special kind of investment through which you can invest in different types together. you can do a diversifies investment by investing in one place. Asset Management Company starts mutual funds. Basically, you give your money to Asset Management Company and many people like you do so. that company invests all the money collectively in different places. They have appointed experts and with their suggestion, they invest the money. They invest money at different places and the return rate they get collectively from these different places out of that some small percent of 1-2% is kept as a profit by the Asset company and the rest you get back as per that return rate. HDFC, HSBC, ICICI, Aditya Birla, Reliance, TATA, these are the few examples of companies and banks who have started their own asset management company. All companies start different kinds of mutual funds in large numbers.
For example, ICICI has started more than 1200 mutual funds. So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing in. mutual funds can give a return rate of 4% and also of more than 30% too. It can be of zero risks and also of high risk too. Because all this depends on where the asset management company is investing your money. If that company is investing in stocks then it will be riskier and you will get more returns and if it's investing in the government bonds then it will be less risky.
TYPES OF MUTUAL FUNDS
Different types of Mutual funds depend based on the investment done by AMC people. We can divide this into the 3 categories: Equity mutual funds, Debt Mutual Funds, and Hybrid Mutual funds
In Equity Mutual Funds, your money will be invested in the stock market. So naturally in this type of Mutual funds generally the risk is more and also the return. In the stock market on which kind of company are you investing, if it's a big company then it's called Large Cap Equity Funds If it's a small company then it's called Small-cap and in the same way Mid Cap equity Funds. Big company doesn't have many risks as compared to the smaller ones but big companies won't have growth rate as high as it can be for the smaller companies. So risk and return b0th are less in big companies. ICICI prudential blue-chip fund is an example of a large-cap equity fund. If you invest here for a year then after a year your expected return is 11.3% but if you invest for 5 years then your expected return can be 19.7%. That before today in the last 5-10 years what has been the performance of the mutual funds, what's the growth and it gives you the number based on its average growth.
. The next type is the Equity Linked Saving scheme that is ELSS, this is a special type of Equity fund where you can save our tax. You can save the tax on its profit. The fund manager purposely invests in such places where there's a high return and also has high risk. IDFC Tax advantage is an example of ELSS funds with the expected returns of 11.3% within a year. If you scroll down and click on other plans and details then you will get the details of tax too. that how much can you save and much you will have to pay. In this detail you can see for all the mutual funds if you scroll down and click then you will know the amount of tax that you will have to pay. The next type is Sector Mutual Funds, here specifically such companies are invested in which belongs to a big sector like the Agriculture sector All the companies which are under the agriculture sector, they are invested on. A logistics or transport sector, so there. One example of this is UTI transportation and logistics funds. so the investment is done in that sector. these funds are riskier since all the investment is done in one sector so if the sector is going down everything depends on that.
The last type of equity fund that I would want to tell you is an Index fund. Index Funds are passively Managed funds that are no agent of AMC is looking at where to invest the money here These are passively managed that is according to the market's rate's up and downs they too go up and down. looking at the price of Sensex and Nifty it varies. Now let's look at the second category of the mutual funds' friends, that is Debt Mutual Funds. these are those mutual funds that are invested in the debt instruments.
Debts instruments are bonds, debenture, certificates of deposits now these things are exactly what you can read it for yourselves If I keep telling all this then the video will go longer, I will tell you what are bonds Sometime if the Government needs money and it's not getting that through the budget then the government borrows money from the people. and take loans from the people. It is called bonds You can invest here, give to the government and the government will return you the money after a fixed interest. Now debt mutual funds are of various kinds, let's first talk about liquid funds Liquid funds are those mutual funds which can be easily and quickly converted into cash. Liquid means that actually, It's not the liquid to drink. In economics, the liquid is something that can be easily converted into cash. So this thing can be converted into cash within a day or two. But it has a very low risk, such low that you can basically consider this as an alternative to a savings account
. Asset liquid fund is one such example where you will get the return of 7.1% in a year Here you can see in the graph how consistent is its growth so this can show how less is the risk here. for the last 5 years, it's increasing slowly with this percentage.
The next type is Gilt Funds, these are those funds where Investments are done on the Government issued bonds. So technically it has zero risks because it's never possible for the Government to not return your money. Mostly the interest rate can fluctuate. The next type is Fixed Maturity plans and this can be considered as an alternative to Fixed deposits, FD friends. because it has very low risk just like FD and it is done for a fixed time. For a specific time investment is done here and you can't take the money before that. So these are the few main types of Debt funds there are more like the Junk Bond scheme.
The third category of mutual funds is Hybrid Mutual Funds friends, basically its a mixture of debt and equity mutual funds. Some people want to invest in the stock market but don't want to invest all the money there and also invest some amount in the Debt instruments., so hybrid mutual funds are for them If most of the money is invested in a Debt fund then it will be called as the Balanced savings Funds Approximately the ratio is 70:30 that means 705 of your money is at the low-risk debt funds and 30% is in the equity funds. and if it's the other way, 70% is in the equity funds at a higher risk, then it is called a balanced advantage fund. and Hybrid mutual funds to have different types like arbitrage funds but friends I feel I have given a lot of information and knowledge to you Now I leave it to you, go ahead and research yourself on further kinds of mutual funds and which one is better for you.
The biggest advantage of mutual funds in comparison to other investments is that it is already diversified. Your risk gets very low due to diversification. because you are not investing in one place so if one thing crashes so it won't affect your money. So in comparison to the stock market, gold, real estate, mutual funds are less risky however the exact risk depends on the mutual fund that you are investing in. One more good advantage is that it is affordable, you don't have to invest a big amount altogether You can use SIP and invest a small amount every month. and all the investment of the mutual funds, friends is done by a professional expert or a fund manager who decided where to invest and where to not. This you don't need to so it's again a big advantage that an expert is working for you. But friends this mutual funds has a disadvantage too. If you are giving it to an unknown person, you don't know how it's going to perform. however, he is an expert but you can't trust 100% that an expert will be right all the time.
But the biggest disadvantage that used to be for the mutual funds earlier is that the agents used to take a lot of commissions for investing in the mutual funds. They say that gives us the money we will invest for you in the mutual funds and deduct a lot of commissions for themselves. now disadvantage is not possible friends due to the smartphone apps who can do this for you Like this GROWW app where there is no hidden charges and doesn't deduct it's hidden charges, I'm talking specifically about this as I have not seen the other apps and here there no commission or charges getting deducted, just the asset management company who takes their part. and that is going to be there if you invest in any mutual funds For transparency
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