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Earn interest up to 8.10% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable)

What are Mutual Funds?

Mutual funds are a highly preferred investment instrument which seek to bring together security as well as high returns by investing across a portfolio of securities including equity, debt and hybrid funds. When you invest in a mutual fund, you essentially allow a fund manager to invest your money, along with that of several other investors’, in a bouquet of funds that will guarantee the highest returns, while also ensuring the maximum security of your investment. The fund manager studies the market conditions and takes astute decisions on how to best invest your money. If you invest in mutual funds on Finserv MARKETS, you can yourself gain access to market insights through your Customer Portal and track the performance of your portfolio in real-time and assess it from anywhere at all. Your free account can be opened with only 4 steps on Finserv MARKETS, and you can enjoy higher returns by paying 0% of your returns as commission fees, by investing in a Direct Mutual Fund.

Types of Mutual Funds

A mutual fund refers to a diversified portfolio of investments, managed by a fund manager, wherein the investment amount is distributed across a bouquet of securities to ensure the highest returns and maximum security of the funds. The types of mutual funds are denoted by the type of security that the maximum portion of the investment has been made in, and the returns and security associated with each of these differ based on the type of security they are. Three broad types of mutual funds include equity funds, debt funds and hybrid funds; all available on Finserv MARKETS. Read on to learn the difference between these three major types of mutual funds.

  • Equity Funds: Equity mutual funds refer to those funds where the maximum portion of the investment is made into equity funds. At least 65% of such a fund would be invested into equity stocks, and they could include large-cap, mid-cap, small-cap or sector-based stocks. Equity funds are usually considered riskier than other kinds of mutual funds owing to their dependence on market conditions, wherein their movement and growth are both dependent on factors influencing the market, including economic or political instability. These kinds of funds are further segmented into income funds, wherein a dividend is issued to the investor at a regular frequency, as well as growth funds, wherein the dividend is reinvested into the stock and ensures growth over a long-term period.

  • Debt Funds: Debt mutual funds are the best option for those not looking for very high returns, and their priority is to ensure the security of their funds. Debt funds ensure assured returns and capital protection, though returns might be lesser as compared to equity funds. Their easy liquidity is an additional convenience offered by these funds, since they can be liquidated at any time to provide monetary resources during emergency financial situations. The range of fixed income instruments that debt funds typically invest in include money market instruments, government securities, rated bonds, corporate bonds and debentures, commercial paper treasury bills and fixed income securities.

  • Hybrid Funds: Hybrid funds ensure a mix of both equity and debt funds, based on the risk appetite and goals stated by investors. The proportion of the fund’s investment on equity and on debt will depend on the investors and can be adjusted. There are two kinds of hybrid funds, based on the percentage of their allocation into equity and debt funds. Aggressive hybrid funds invest more into equity funds as compared to debt funds, while conservative hybrid funds invest the majority of their funds into debt instruments.

Benefits of Mutual Funds

There are several benefits that mutual funds offer, which makes them more attractive options as compared to other investment instruments. Read on to learn the benefits you can accrue by investing in mutual funds on Finserv MARKETS.

  • Less Time Consuming: When you invest in mutual funds, a fund manager keeps a vigilant eye on market conditions and takes decisions on behalf of the investors. This frees investors from having to constantly watch the market’s ups and downs, and change their investment strategy. By investing in mutual funds on Finserv MARKETS, not only do you have access to a dedicated fund manager; but you can also stay updated on your portfolio at any point of time from anywhere at all.

  • Diversification of Investment Portfolio: The greatest advantage offered by mutual funds is the enormous diversity it offers, in terms of the funds you invest in. Since you are not singularly dependent on one kind of instrument, your chances of earning returns are much higher as compared to investing in other instruments.

  • Divisibility: Equity stocks for some companies cost more than others, and to buy a single stock for such a company an investor would have to save up for some time. However, when you invest in mutual funds on Finserv MARKETS, you can own a portion of that fund within your portfolio.

How to Compare Mutual Funds

It is essential to compare mutual funds and their different criteria and the advantages each of them offer, before you even consider placing any of your money in it. Read on to learn about the different criteria you can use to compare between mutual funds.

  • Compare returns: The easiest and most basic way of comparing mutual funds is to compare the returns each of them provides. You can simply compare the Net Asset Value (NAV) at the start of the fund and the ending NAV to get a simplistic idea of how two mutual funds compare against each other.

  • Use benchmarks: Using a benchmark as a yardstick to compare mutual funds allows you to assess each fund’s performance, since it lets you measure the returns a fund should have generated as opposed to the returns that were actually generated. If the fund is able to generate returns higher than that indicated by its benchmark index, then the fund’s performance is considered to be excellent.

  • Time Period of Investment: While comparing two or more mutual funds, it is important to consider the time period for which you wish to invest. If you intend to stay invested in a fund over a long period of time, you should compare the long-term performance of funds. If you are investing your surplus funds into short-term funds, then it is important to compare the liquidity options offered by short-term funds before taking a decision.

  • Expense Ratio: This is the annual fee charged by the fund manager for managing your fund portfolio, and it has a direct impact on the returns you earn since the commission is usually charged as a percentage of returns earned. Opt for the fund offering the lowest expense ratio, since that allows you to generate the highest returns. When you opt to invest in mutual funds through Finserv MARKETS, you can choose a Direct Mutual Fund whose expense ratio is much lower since the commission is 0%.

How to Apply for a Mutual Fund Online

With increasing digitisation, it has become easier to conduct all your operations online and your investments are no exception to this. You can invest in a direct mutual fund online on Finserv MARKETS, and create your free account in just 4 steps and have access to the latest insights on the market and your portfolio. Read on to learn how.

Step 1 - Choose the mutual fund you wish to invest in.

Step 2 - Provide the investment amount you wish to invest.

Step 3 - Complete your KYC by uploading relevant documents.

Step 4 - Pay the amount you are investing.

Once you have completed these 4 steps, you now have a free account that you can use to invest in the best mutual funds available to you; and earn high returns while also ensuring the security of your investment.

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