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What are Mutual funds? A Simple Guide to Smart Investing

Mutual funds are an excellent investment vehicle for building your wealth without having to be a financial wizard. Whether you are new to investing or you want to diversify your investment portfolio, this Invest Global guide will teach you about mutual funds, how to invest in them, and why they might be the intelligent decision for you.

What Is a Mutual Fund?

A mutual fund is an investment that combines money from numerous individuals and invests it in many things such as:

  • Company shares (stocks)
  • Government or corporate bonds
  • Gold, silver
  • Real estate trusts (REITs)

All the investors purchase fund units. One unit is a share of the overall portfolio. Mutual funds are managed by experienced fund managers who invest for the benefit of the fund's purpose.

How to Invest in Mutual Funds

Step-by-Step Guide

  • 1. New Fund Offer (NFO): When a new mutual fund is launched by an Asset Management Company (AMC), it issues units to the investors at a launch price, typically Rs. 10.
  • 2. KYC Compliance: First of all, you need to undergo the Know Your Customer (KYC) process. You can be assisted by a financial advisor on our website Invest Global.
  • 3. Bank Account: You have to invest from your own bank account.

After the NFO Phase

Once the NFO, your funds are invested in a combination of assets as per the scheme. If the scheme is open-ended, you can:

  • Purchase additional units at the day's price (NAV - Net Asset Value)
  • Sell (redeem) your units anytime

Example:

If you invest ₹10,000 during the NFO at ₹10 per unit, you will get 1,000 units.

Tip: Redemptions from equity funds are usually made within 3 working days (T+3). Certain schemes will charge an exit fee if you redeem your money early.

Different Types of Mutual Funds

1. Equity Funds

These investments put their money primarily in shares. They try to appreciate your capital.

Sub-categories:

  • Large Cap
  • Mid Cap
  • Small Cap
  • Flexi Cap
  • Multi Cap

These are some of the best mutual funds to invest in if you seek long-term growth.

2. Debt Funds

These invest in lower risk securities such as bonds and money market securities. These are designed to provide fixed income with lower risk.

Sub-categories include:

  • Liquid Funds
  • Short Duration Funds
  • Long Duration Funds

3. Hybrid Funds

They can both be equity and debt. They can further consist of gold or real estate.

Types of hybrid funds:

  • Aggressive Hybrid
  • Conservative Hybrid
  • Balanced Advantage
  • Equity Savings

If you want a combination of growth and security, hybrid funds may be a good option.

How to Choose the Best Mutual Funds to Invest

  • Know your risk level
  • Choose your objective (e.g., retirement, house, child's education)
  • Choose between growth (equity) or safety (debt)
  • Consult your advisor or look for credible sites such as Invest Global

Beginning with SIP mutual funds (Systematic Investment Plans) is the best method for incremental wealth accumulation. You invest a predetermined amount every month, perfect for starters and low-budget people.

Taxation Principles on Mutual Funds

Equity Funds (More than 65% in stocks)

  • Short-term (Less than 12 months): 15% tax
  • Long-term (More than 12 months): Exempt up to ₹1,00,000; 10% thereafter

Non-Equity Funds (Debt, gold, REITs)

  • Short-term (Less than 36 months): Taxed as per your income tax slab
  • Long-term (More than 36 months): 20% tax with indexation benefit

Note: ELSS (Equity Linked Savings Schemes) offer tax benefits under Section 80C (up to ₹1.5 lakh deduction).

Why Invest in Mutual Funds through Invest Global?

At Invest Global , we help you find the best mutual funds to invest in based on your goals and risk level. Our expert insights and easy-to-use tools make it simple for anyone to start with mutual funds , especially SIP mutual funds .

Conclusion - Start Investing in Mutual Funds Today!

Mutual funds are a smart, flexible, and professional way to grow your money. Whether you're starting small with sip mutual funds or exploring the best mutual funds to invest in , there's an option for everyone. With help from experts like Invest Global , your investment journey becomes easier and more rewarding.

So don't wait. Begin your journey with mutual funds now and secure your financial future!