Products > Mutual Funds

As the name suggests, a Mutual Fund is a "mutual" meaning shared, "fund" implies corpus. It is a facility whereby an investment company (AMC - Asset Management Company) accepts investor's funds for investing into a pre-determined investment avenue.

In lieu of the same, the investors are allotted units proportionate to their contribution. This fund can be used for investing in capital market instruments like shares, bonds etc.

The AMC manages the investor's funds and invests on their behalf. They administer the performance of the funds in the best possible manner to meet the investment objective. Unlike an individual investor, an AMC provides more diversification, liquidity and professional services to the investors for a small fee.

Apart from its various benefits, mutual fund investments are subject to market risks based on the investments they hold.

Benefits of investing in a mutual fund

  • Professional Management
  • Diversification of funds - lesser risk
  • Easy to Track
  • Potential for Excellent Return
 
  • Higher Liquidity
  • Secure
  • Service Centre backup
  • Transparency
 
  • Flexibility
  • Choice of schemes
  • Tax benefits
  • Well-regulated

Following are the lists of some risks associated with mutual fund investments

  • The investments are subject to market risks
  • There is no Guarantee about the return on investment or the time period - in case you need complete capital protection at all times, equity mutual funds are not a good option
  • Since your investments are diversified, most often than not, you miss out on stock specific gains
  • Although the regulations change frequently, one might have to pay an entry, exist and fund management charge. There can also be a broker's fee

Some of the characteristic features of mutual funds are

  • Units can be purchased from the fund house itself instead of other investors on a secondary market
  • Units are exchangeable, meaning investors can sell their units back to the fund
  • Generally new units are created and sold to accommodate new investors
  • The investment portfolios are managed by separate entities known as investment advisors

Mutual funds are segregated based on their structure, investment objective and other schemes. These are mentioned as below

Structure

  • Open-ended schemes
  • Close-ended schemes
  • Interval schemes

Investment Objective

  • Growth schemes
  • Income schemes
  • Balanced schemes
  • Money market schemes

Other Schemes

  • Tax Saving Schemes
  • Special Schemes
  • Index Schemes
  • Sector Schemes

There are a number of methods of investing in mutual funds- SIP, STP and Lump Sum being the main ones.

SIP (Systematic Investment Plan)

Working on the principal of planned and regular investment, SIP allows the investors to invest in a mutual fund by making monthly or quarterly investments, in lieu of a lump sum one-time investment. This enables them to invest in a mutual fund without altering other financial outflows.

STP (Systematic Transfer Plan)

In STP, the overall commitment amount is pooled initially in an Ultra Short Term Debt fund (similar to a fixed deposit). Later, small amounts are transferred to the Target Equity Fund on a monthly or weekly basis.

Lump Sum

A simple one-time investment is called as Lump Sum investment. The amounts can be as less as INR 1000 (varies from fund to fund). In return, units are allotted as per the prevailing Net Asset Value (NAV).

Online Mutual Fund Platforms

MONEY & more offer you two comprehensive mutual fund investment platforms. Click on the links below to know more and choose the one that suits your requirements

Click here to know about Mutual Funds
Products