Did you know more than six million new investors invested in mutual funds in 2022 and retail investors make up 91.1% of total mutual funds accounts in India? These statistics indicate why mutual funds are popular among investors.
In case you are a first-time or novice mutual fund investor, here is all you need to know.
Understanding Mutual Funds
A mutual fund is a pool of money from several retail investors with a common investment objective. It is professionally managed by a fund manager who invests this money in a portfolio of stocks, bonds, and other market securities. The purpose of mutual funds is to maximize returns and minimize risks.
Benefits of Mutual Funds
Mutual funds today offer a host of benefits:
? Ideal for Stock Market Beginners
If you are a conservative or new investor who wants to gain entry into the stock market without taking much risk, then mutual funds are a good option. You can start with a small amount and then invest more as you gain confidence.
? Diversification
There are different types of mutual fund schemes that invest in a range of sectors, industries, and companies. There is also asset class-wise diversification - pure equity, pure debt or hybrid funds (equity-debt mix). This kind of diversification helps you to spread the portfolio risk against market volatility. You can even consult a
mutual fund advisor to diversify your portfolio as per your investment goals and risk tolerance limit.
? Professional Management
When you invest in the stock market directly, you have to research all stocks and monitor the price movements on your own. However, mutual funds have a professional fund manager who conducts in-depth industry research, handpicks stocks with profit potential, and also keeps track of their performance. That way, you save a lot of time and effort.
? Better Returns
Since mutual funds usually have a balanced exposure to different asset classes, sectors, or market caps, they can withstand market cycles and fluctuations better than other market-
linked instruments. Hence, they also have the potential to give consistent and higher returns if they stay invested for at least 3-10 years. You can even use an online
mutual fund calculator to estimate tentative returns before investing.
? Lumpsum and Instalment Option
You can invest in mutual funds either through a lump sum amount or Systematic Investment Plan (SIP). A lump sum amount allows you to invest a chunk of money at a time. However, if you want to invest a lower amount periodically, then SIP is suitable. You can start a SIP investment with as low as Rs500 on a weekly, monthly, or quarterly basis.
? High Liquidity
You can redeem mutual fund units anytime you need money. You will get the Net Asset Value (NAV) for the day when you do the redemption. You can invest in mutual funds through Ajmera x-change. We are a reputed financial services platform that offers a range of investment advisory, portfolio management, and debt market services. We can help you select the right mutual fund scheme.
Get in touch with us to know more.