A mutual fund is made up of two words mutual and a fund where mutual means common and fund, you must know money, in this way mutual fund means common fund in which many people’s money is collected and fund manager Money is invested in stocks, bonds, debentures, etc., through this. You can also invest through SIP with Rs 100.
People who have to invest in the share market but do not have proper information or are afraid of the high risk of the share market, then they can invest in a mutual fund. Here professional people who have complete knowledge of the share market invest our money, they are called fund managers. In mutual funds, your money is invested in many companies, due to which the risk is greatly reduced and the return is also very good in it.
Asset Management Company is the company that opens mutual funds. We give our money to Asset Management companies like Hdfc, AXIS, etc and their fund manager invests the money of many people like us by diversifying in a lot of places.
What is SIP?
Systematic Investment Plan (SIP) in which a fixed amount goes from your account to the mutual fund every month. When we buy a mutual fund, we get two options.SIP and lump sum. Once we start SIP in any mutual fund, then every month an amount that we set keeps going from our bank account to that mutual fund. Money has to be paid only once in a lump sum.
what is actively and passively managed mutual funds?
Mutual funds are basically of 2 types. Actively Managed Mutual Fund and Passively Managed Mutual Fund | Actively Managed Mutual Funds are those in which the professionals who manage our fund actively spend their time every day searching for new company’s shares and invest money in the company whose growth they like and passively managed mutual fund There are those in which there are already some rules set about how the money will be invested. These are also called index funds.
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Example SBI Nifty Index plan Growth The rule is already set in this mutual fund, money will be invested in the top 50 companies of Nifty 50. Such funds are also called index funds. As the market cap of the top 50 companies keeps on changing, the money keeps changing accordingly, that is, by withdrawing money from the company which gets out of nifty 50, money is invested in the new company which comes in nifty 50. In this, the Expense Ratio is less.
How to Invest in Mutual Funds?
You can invest in mutual funds online and offline from anywhere. You can use the Groww app or ZERDODHA to invest online. The condition is this, from whichever platform you invest, it should be REGULATED from SEBI. If we want, we can also invest from any bank. We have to go to the bank and tell the Mutual fund in which we want to invest, then SIP will start from our bank.
To know whether the platform on which we are investing is investing in our mutual fund scheme or not, we can show our Folio Number in the bank and ask which sip we are running and how much they have in it. Money is deposited We get this folio number on our email id from the company whose mutual we have taken.
Which is correct between SIP and LUMP SUM?
To invest a lump sum, it is important for you to know that the market is not overvalued. If you invest your Lump Sump amount at the time when the market was overvalued then you will not get a good return. Overvalued means that the share price is much higher than its real value. Getting SIP done is better than a lump sum, in this, you can easily invest every month even with less money.
How to find out whether the market is overvalued? (Buffet Indicator method)
There are many methods like P/E Ratio, Dividend Yield, BEER Ratio, etc. to know whether the market is overvalued or not but there is also a powerful Method Buffet Indicator. Market Cap to GDP Ratio is done to see Buffet Indicator. If the Ratio is between 0.5- 0.75 then the Market is undervalued i.e. we can invest lump sum money. If this ratio is between 0.75 – 0.90 then the market is fair valued and if it is more than 0.9, the red flag is considered i.e. the market is overvalued.
What is the returns in mutual fund?
In this, the return is different in different schemes, but it gives an average return of 7 to 20%, as well as compounding interest is available in it, which is very good for the long term. If your SIP is run but your money is decreasing then it may be due to volatility which is happening due to higher sale of shares but it gives you a good return in a long time. Mutual Funds are good for long-term investment. Grow calculator You can see how much return you will get by clicking on this link, it is not fixed but it gives you an idea.