Why “Mutual Funds Sahi Hai”?

Firstly, let’s understand why mutual fund is considered as one of the best investment products for all kinds of investors.

What is Mutual Fund?

According to Association of Mutual Fund in India (AMFI) ,”A mutual fund is a collective investment vehicle that collects & pools money from a number of investors and invests the same in equities, bonds, government securities, money market instruments.”

The money collected in mutual fund scheme is invested by professional fund managers in stocks and bonds etc. in line with a scheme’s investment objective. The income / gains generated from this collective investment scheme are distributed proportionately amongst the investors, after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or NAV. In return, mutual fund charges a small fee.

In short, mutual fund is a collective pool of money contributed by several investors and managed by a professional Fund Manager.

Benefits of investing in mutual funds:

1. Diversification: Mutual funds invest in a variety of assets, which helps spread risk. This means that even if one investment performs poorly, others may perform well, balancing out the overall performance.
2. Professional Management: Mutual funds are managed by professional fund managers who have the expertise and resources to make informed investment decisions on behalf of investors.
3. Accessibility: You can start investing in mutual funds with a relatively small amount of money, making them accessible to a wide range of investors.
4. Liquidity: Mutual funds offer high liquidity, meaning you can easily buy and sell your investments. This makes it easier to access your money when you need it.
5. Variety: There are many types of mutual funds available, catering to different investment goals and risk appetites. Whether you’re looking for growth, income, or stability, there’s likely a mutual fund that fits your needs.
6. Tax Benefits: Certain types of mutual funds, like Equity Linked Savings Schemes (ELSS), offer tax benefits under Section 80C of the Income Tax Act.
7. Transparency: Mutual funds are regulated by the Securities and Exchange Board of India (SEBI), ensuring a high level of transparency and investor protection.

Risk factors: Mutual Fund Schemes are not guaranteed or assured return products. Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal.

Mutual Fund Industry Trends

According to AMFI latest data, Assets managed by the Indian mutual fund industry has increased from Rs. 46.28 trillion in July 2023 to Rs. 64.71 trillion in July 2024. That represents 39.83% increase in assets over July 2023.

State wise Average AUM July 2024 (Rs. Crore)

Composition Investor’s Holdings

Mutual funds can be tailored to meet specific financial goals, such as retirement planning, education, or buying a home. There are various types of funds designed to align with different investment horizons and risk tolerances. Many mutual funds offer systematic investment plans (SIPs), allowing you to invest a fixed amount regularly, which is suitable for all especially for salaried class/retail investors who don’t have enough time and expertise to track the market trends on a regular basis. Due to advent of technology, it is convenient to invest in mutual funds using various mobile apps. In the past years, equity mutual funds have delivered impressive returns, that attracted a lot of investors. If you are also thinking to invest your savings in mutual funds to grow, always must consult your financial advisors before making any financial decisions.

Keep learning…..Keep investing….