What Are Mutual Funds & How to Invest In It

Mutual fund houses will collect money from the investors & invest money on their schemes on behalf of the investors

Selecting the right mutual fund scheme will help the investors to meet their long term goals

How Mutual Fund Houses Will Work:

There are many mutual fund schemes; to get better idea I can guide you with below example
  1. Mutual fund houses collect money from the investors

  2. After collecting money from the investors, they will invest this money in different equity stocks based on the funds available with them

  3. Example, they created a fund of small cap, they will invest your money in different small cap stocks, the stock holding can be any number like 10, 20 & 30 etc

  4. In simple, there will be diversification of the risks between various stocks, the risk part is less in mutual funds because all the stocks may not move under the same direction ( some may move up & some may move down ), hence the risk is limited or balanced

  5. So your money will be safe and secure comparing risk with equity stocks
How To Invest In Mutual Fund:
Investing in mutual funds is of two kinds
  1. Direct funds
  2. Or hiring mutual fund houses
Direct Funds: To invest in directly in mutual funds, go for the concerned website, and do all application & legal formalities.The rate of return is little higher comparing with general schemes but the biggest drawback is you have to take care of all legal formalities

Hiring Of Mutual Fund Houses: Mutual fund houses will take imitation on behalf of you to complete all formalities of the schemes so that they charge small amount as their service changes
Some of Investment Strategies for better gains in mutual funds:
  • Invest in SIP Mode to reduce the risk of volatility

  • Invest when a particular sector is non performing and sell it when it is performing

  • Example: from past 6 months ( jan 2018 to july 2018 ), all small & mid caps where down, so invest in small and mid cap funds now and sell it when all stocks are high on that time

  • Invest in direct schemes for better returns if you are able to manage the formalities of the schemes

  • Review all past performance of the particular scheme before investing like rate of return, rating etc

  • If you are investing in sector based mutual fund schemes, it is best to select FMGC, Banking etc