What is Mutual fund – A mutual fund is a professionally managed open investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.
Have you ever heard of what is mutual funds and what is mutual fund expense ratio? Do you know how they work? If not, I’ll tell you today.
Many people create many fantasies in their minds simply by learning about them and without knowing anything they think about it. What is not correct to do at all.
That is why today I thought why do you take the sadness out of your mutual funds and become aware of their truth.
Mutual funds are a very good and easy way to earn money. It will not cost you thousands of rupees to invest. You can also invest in it at the rate of just Rs.500 per month.
Many people consider mutual funds and the stock/equity market as one, but this is not the case at all. Mutual funds and the stock market divide the market, but there are many differences between the two.
Starting with today’s post, we will learn what the difference is between them and, above all, what are mutual funds and how we can safely invest in them.
What is Mutual Fund?
Mutual funds, what happens to find the right name? It is a fund (collection) in which investors invest a lot of money. The funds of this group are managed to achieve the maximum possible benefit.
Simply put, mutual funds are funds that consist of a large amount of money. In which the money invested is used to invest in different places and the investor tries to get the most out of his money.
The job of managing the fund is done by a professional person called a professional fund manager.
The job of a professional fund manager is to look after the mutual fund and to make more profit by putting the money of the fund at the right place. If put in easy words, its job is to convert the money put by the people into profit.
Investment funds are registered under SEBI (Securities and Exchange Board of India) which regulates the Indian market. SEBI does the job of protecting investors’ money in the market. SEBI confirms that no organization is misleading people.
Mutual funds have been around in India for a long time, but even today people don’t know much about it. At first, people believed that mutual funds were only for the wealthy.
However, this is not the case at all and it seems that this concept may change today. People have moved towards mutual funds. Today, mutual funds are not just for the wealthy.
Rather, one can invest in Mutual Funds at the rate of only Rs 500 per month. The minimum amount of investment in Mutual Funds is Rs 500.
What is Mutual Fund Expense Ratio?
Mutual Fund Expense Ratio is the annual maintenance charge that mutual funds assign to finance their expenses. This includes annual operating expenses, including operating fees, allocation charges, etc. It can be illustrated by the expense ratio formula, given by the total expense divided by the total assets of the fund.
In a simple word (Mutual Fund Expense Ratio = Investment Management Fees). Different mutual fund provider has its own expansion ratio.
HDFC Mutual Fund Regular Plan Expense Ratio
UTI Mutual Fund Regular Plan Expense Ratio
SBI Mutual Fund Regular Plan Expense Ratio
History of In India
The Indian mutual fund industry started in 1963 with the formation of the Unit Trust of India (UTI) in India at the initiative of the Reserve Bank of India (RBI) and the Government of India.
Its main objective was to attract small investors and make them aware of investment and market-related issues.
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, UTI separated from RBI. The Industrial Development Bank of India (IDBI) replaced the RBI with regulatory and administrative control. And he started working with UTI.
The development of Mutual Funds in India can be divided into several stages. As such the first phase was from 1964 to 1987, in which UTI had a fund of 6700Cr ₹.
After that, the second phase began in 1987, in which the inflow of funds from the public sector began. During this time, many banks had the opportunity to create mutual funds.
SBI created the first NONUTI mutual fund. The second phase ended in 1993 but by the end of the second phase, AUM i.e. Assets under management increased to 47004CR more than 6700Cr. There was a lot of enthusiasm in the mutual fund among investors in this phase.
The third phase began in 1993 and lasted until 2003. Private sector financing has been approved at this stage. At this stage, investors obtained more mutual fund options. This episode ended in 2003.
The fourth episode started in 2003, which still continues. In 2003, the urinary infection was divided into two separate phases. The first was SUTI and the second was the UTI Mutual Fund, which operated in accordance with SEBI MF rules. Read the effects of the 2009 economic downturn worldwide.
Investors also suffered greatly in India. Because of this, people’s trust in mutual funds has decreased somewhat. Gradually, however, the industry began to get back on track. In 2016, AUM was 15.63 trillion. What was the highest so far?
The number of investors is above 6 CR and millions of new investors are added every month. This episode has proven to be gold for mutual funds.
Types of Mutual Funds
There are different types of mutual funds. We can divide them into 2 sections. The first is the structure-based mutual fund type and the second type is an asset-based mutual fund.
A) Types of Mutual Funds depending on the structure
1. Open-ended mutual fund
Open-ended funds = Investors in this project can sell or buy funds at any time. There is no fixed date or time limit for buying or selling funds.
These funds provide liquidity to investors, which is why investors have chosen them.
2. Close-ended Mutual Funds
This type of plan has a fixed expiration period and investors can only purchase funds during the fundraising period. And the shares of such national funds are also included in the market. Later they were also used for business.
3. Interval Funds (Interval Funds)
These national mutual funds consist of open funds and closed funds. The advantages of both funds prevail in this.
This allows investors to exchange funds on predetermined breaks. And the funds can be processed during that period.
Based on the structure-based type of mutual funds, now we will discuss how many mutual funds will be taken based on resources.
B) Types of Mutual Funds based on Assets
Funds Debt Funds = The risk to investors in such funds is very low. Investors invest in bonds, government bonds, and other fixed income, which is a safe investment.
These funds provide a fixed return. If you want a stable income, this fund is for you. If the fund investor’s earnings are more than Rs 10,000, the investor has to pay taxes.
2. Liquid Mutual Funds
Liquid Funds = It is a safe alternative to investing in liquid funds that invest in short-term debt instruments. So if you want to invest for a short period of time, liquid funds may be your choice.
Funds Equity Funds = Equity financing is for you if you want long-term benefits. These funds invest in the stock market. These funds also include risks, but their benefits are greater than others.
4. Money Market Funds
These funds provide reasonable returns to short-term investors. It is invested in safe places.
5. Balanced Mutual Funds
These national fund schemes have a combination of equity funds and debt funds. The funds deposited in these national mutual funds are invested in both equity and debt.
This type of fund provides investors with income stability on the one hand and on the other hand, it also encourages income growth.
In addition to these funds, there are different types of funds, but this is the main and most widely used fund.
How to invest money in Mutual Fund?
By the way, you will find many such Android apps in the market using which you can easily invest in Mutual Fund. Some of them are special such as Groww, MyCams, InvesTap, KTrack Mobile App, IPRUTouch App, etc.
By following my advice, you can use the Grow Mutual Fund app. Because I have been using this app for a long time and still have no problem.
With this link, if you don’t have an account yet, you must first register in the Grow app. Once you have created an account, you can easily invest money in mutual funds through this application.
Benefits of Mutual Funds
Although there are many mutual fund fields, today I will try to give you complete information on the important fields.
1. Professional management
The money you are investing in mutual funds is managed by mutual fund experts with their experience and expertise.
Before investing this money, they collect information from the fund from which the money is raised and investigate, if you agree with the information they have collected, they just invest.
2. Diversification (Diversity)
The key to a safe investment is to divide your money into many places and invest in many places instead of keeping your money in one place. Each mutual fund invests money in different places.
Good funds can be invested not only in other companies but also in other sectors or companies of different sizes. What gives maximum protection to investors.
3. Variety (option)
Today’s mutual funds have something for every type of person. There are all kinds of funds available for those who want higher returns to get higher returns on the most guaranteed funds and for those who want to make safer investments.
If you want to make any kind of investment, you may need to create some mutual funds and it suits your needs.
4. Convenience (facility)
You can easily invest in mutual funds. You can easily withdraw funds from the fund. To invest, you must complete a form that you can complete online or offline or anywhere.
After that, you can sell or buy the funds both online and offline. Mutual funds have many options with many benefits
5. Affordable (cheaper)
The share price of large companies is very high. Many times you want to invest in these companies, but you cannot because of your limited budget. Mutual funds have many people raising money, but their money is invested in large companies.
And your money makes more profit there. Mutual funds are not the only way that small investors can invest in large companies through mutual funds.
6. Tax Benefits
Whenever you invest in the stock market, you have to pay tax to buy or sell shares. But in Mutual Funds, you get tax exemption.
In some funds, you do not have to pay any taxes on your earnings for some time. Tax exemptions are also one of the reasons why they are becoming so popular.
Before investing in a mutual fund, collect all documents and all information related to the fund. You will be responsible for any damage.
Conclusion about what is Mutual Funds
Through this post, we have tried to provide you information about what is Mutual Funds and what is mutual fund expense ratio.
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