What is a mutual fund? and its type

Azad Technical February 03, 2019 MakeMoney 2 comments

What is a mutual fund? and its type

Have you ever heard about Mutual Fund in Hindi? Do you know how they work? If not then today I will tell you about it. Many people simply imagine many things in their mind when they hear about them and do not know anything without thinking about it in the mind. Which is not exactly right to do. So today I thought, why do you remove the turmoil that is sitting on the minds of people in the minds of people and make you aware of its truth.

There is a very good and easy way to make money from mutual funds. You do not have to have thousands of rupees to invest in this. Rather, you can invest in just Rs 500 per month as well. Many people consider Mutual Funds and stock / share market to be the same, but not so at all. Both mutual fund and share market are part of the market, but there is very much difference between the two. From today's post, we will know what is the difference between these and what is the purpose of these mutual funds and how can we safely invest in it?

What is the mutual fund?

What Is Mutual Funds

As the name suggests mutual fund, a lot of investors' money is kept mutually, this group of money is managed to earn the most profitable profit. Simply put, Mutual Funds are a fund of lots of people's money. In which the money imposed is used to invest in different places and it is tried that the investor should be given more profits than his money. The fund is managed by a professional person, known as the Professional Fund Manager.

The professional fund manager's job is to look after the mutual fund and make more profit by placing the funds in the right place. If used in simple words, its work has to be converted into profits of the money imposed by the people.

Mutual funds are registered under SEBI (Securities and Exchange Board of India), which governs the market in India. Safeguarding investors' money in the market is done by SEBI. It is ensured by SEBI that some company is not cheating with people.

Mutual funds have existed in India for a long time, but people still do not know much about it today. In the initial period, people had the notion that the Mutual Funds are meant for the rich category only. But this is not so, and in today's time this perception seems to be changing. The trend of people has increased towards Mutual Funds. In today's times, the Mutual Funds are not meant for the rich class only. Rather anyone can invest in Mutual Funds at the rate of only 500 ₹ each month. Minimum amount of investment in the Mutual Funds is 500 rupees.

History of Mutual Funds In India

With the formation of the Unit Trust of India (UTI) on the initiative of Reserve Bank of India (RBI) and Government of India, mutual fund industry in India started in 1963. Its main objective was to attract small investors and make them aware of the issues related to investment and market.

UTI was formed in 1963 under an Act of Parliament. It was established by the Reserve Bank of India. And initially it worked under the RBI. In 1978 the UTI was separated from the RBI. Indian Industrial Development Bank (IDBI) got the right of regulatory and administrative control in place of the RBI. And the UTI started working under it.

The development of Mutual Funds in India can be divided into several phases.

As the first phase was from 1964 to 1987, in which UTI had had a fund of 6700Cr. Then, the second phase starts from 1987, in which public sector funding has started. At this time a lot of banks got the chance to make Mutual Funds. SBI made the first NONUTI mutual fund.

The second phase ended in 1993 but the end of the second phase ended with AUM i.e. Assets under management ₹ 47004CR more than 6700Cr. At this stage, there was a lot of enthusiasm among the investors in mutual funds.

The third phase started in 1993, which lasted till 2003. Private sector funding was approved in this phase In this phase investors get more options of Mutual Funds. This phase came to an end in 2003.

Fourth phase began in 2003, which is still going on. UTI was divided into two separate phases in 2003. The first SUUTI and the second UTI mutual fund that used to work according to SEBI MF rules. Read the impact of the economic slowdown of 2009 on the whole world. Investors also suffered substantial losses in India. People have little confidence in mutual funds. But gradually the industry started coming back on track. In 2016, AUM ₹ was 15.63 trillion. Which was the highest till now. The number of investors has gone up to around 5 CR and millions of new investors are joining every month. This step has proved to be an asset for mutual funds.

Types of Mutual Funds

There are several types of mutual funds. We can divide them into 2 categories. Types of Mutual Funds on the basis of the first structure and the type of Mutual Funds on the basis of second asset.

A) Types of Mutual Funds based on structure

Open ended mutual fund : In this plan, investors are allowed to sell or buy Funds at any time. There is no definitive date or time to buy or sell funds. These funds provide liquidity to investors, so investors are well-liked.
Close end Mutual Funds : This type of plan has a fixed maturity period and investor funds can buy only during the fund period. And such funds are also included in the stock market. After this, they are also used for trading.
Interval Funds : This form of Mutual Funds is composed of both open ended funds and close ended funds. In this, the facilities of both funds are preferred. It allows investors to trade the funds on a pre-determined interval. And funds can be traded on that period. These are the types of mutual funds based on the spoken structure, now we will talk about how many types of mutual funds are based on the asset.

B) Based on the asset Types of Mutual Funds

Debt funds Debt funds :- Such risks to the investor are very low in risk to the investor. Investors invest in debentures, government bonds and other fixed income which is a safe investment. Debt funds offer fixed returns. If you want a steady income, then this fund is for you. If the investor earns more than 10,000 of funds, the investor will have to pay.
Liquid Mutual Funds Liquid Funds :-This is also a safe option to invest. Liquid funds invest in low-end debt instruments. So if you want to invest for less time then liquid funds can be your choice.
Equity funds :- Equity funds are for you if you want to achieve long term profit. These funds invest in the stock market. Such funds also include risks, but the profits they make are more than that.
Money Market Funds :- Such funds provide reasonable returns for investors in the Short Term. It is invested in safe places.
Balanced Mutual Funds :- Equity fund and Debt fund get mixed advantage in such fund schemes. Funds accumulated in this type of mutual fund are invested in both equity and datab. These types of funds, where investors give stability in earnings on the one hand, also increase income growth on the other hand. Apart from these funds, there are many types of funds, but mainly and most commonly used funds That's it.

Benefits Of Mutual Fund

Well, there are many benefits of Mutual Funds. But here we only talk about the important benefits

Professional Management :- The money you invested in mutual funds is managed by mutual funds experts with their experience and their talents. Before investing this money, you take the information from the fund that takes the money in full, then after knowing the information collected by them, it increases your money only.
Diversification (diversity) :- The key to secure investment is that do not waste your money on one place and invest in many places and invest in many places. Every mutual fund invests money at different places. Good funds can be invested not only in other companies but also in other sectors or perhaps a different size company. This gives investors maximum protection.
Variety (options) :- Today there is something for every kind of person in the Mutual Funds. For those who want more returns, those who want higher secured investment than most secured funds, every kind of fund is available. If you wish to invest in any kind, it is possible that some mutual fund will definitely be created for you and it will sit according to your needs.
Convenience :- You can easily invest in Mutual Funds. Equally simple you can withdraw money from funds. To invest, you will need to fill out a form that you can fill online or offline or anywhere. After this, you can sell or buy funds from both methods of online or offline. There is a lot of options in the Mutual Funds as well as there is a lot of facilities.
Affordable (cheap) :- The share price of big companies is quite high. Many times you want to invest in these companies, but because of the low budget you can not do this. While many people have money in Mutual Funds, your money is invested in big companies. And your money earns more profits there. Mutual funds are not only large but also small investors to invest in large companies through Mutual Funds.
Tax Benefits :- Whenever you invest in the stock market, you have to pay tax to buy or sell shares. You get tax rebates in Mutual Funds. In some funds, you do not have to pay any tax on your profits for some period of time. Tax exemption is also one of the reasons that makes it very popular.

Before investing in Mutual Funds, collect all the information related to the documents and funds. You will be responsible for any losses. Through this post we have made you aware of mutual fund.

We hope that you should have liked our post if you have liked this post and now share it with your friends and if there is any problem associated with the mutual fund or want information please write in the comment box