Mutual Funds Investment: People know that mutual fund investments are made with a long-term plan of 5 to 10 years with moderate risk and are capable of providing returns up to 15%. Mutual funds are a great investment option but most people aren't able to make the most of it. Some even suffer losses due to a lack of knowledge.
As mutual funds are invested in equities their volatility is high. This is why finance experts recommend long-term investments. Investments made for 5 or 10 years offer good returns in proportion to the inflation or rate of inflation.
Features and Types
The fund manager earns a profit by investing your invested money in different stocks and in return keeps some amount as commission for himself. There are asset management companies to manage the fund house, such as HDFC Mutual Fund, SBI Mutual Fund, Aditya Birla Mutual Fund, etc.
There are three types of mutual funds - equity, debt, and hybrid. You can invest money in equity if you are capable of taking risks. If you want a good profit with low risk, you can invest in debt. And if you want to ensure moderate risk-return, investing in hybrid would be a better option.
Mutual funds are also divided into several sectors, including technology, banking, automobile, agriculture, and FMCG. If you can predict which sector will be profitable in the future, you can invest there.
There are some tax-saving funds, too, where you can get tax deductions under section 80C. But here you will not be able to withdraw money, because there is a lock-in period of 3 years.
How To Invest
The first method is Systematic Investment Plan (SIP) and the second is investing a lumpsum amount. You can take SIP directly. It will enable you to cultivate a habit of regular savings investment. But lumpsum investment is recommended when the market has crashed and there is a possibility of it becoming strong in the future.
Check the Following Things First
It is first necessary to check the return process of the fund for the next 5 to 10 years. The commission ratio should also be checked - it should not exceed 1-2%. You will also have to check the entry-exit load. It refers to how much money can be deducted when you are investing and if you get money after maturity, how much will be deducted.
Here's How You Should Invest
Get your KYC done by setting a target goal online or through a consultant. Register on the website by providing your PAN, Aadhar, and canceled cheque to the mutual fund company. Their staff will come and take the necessary documents from you. The second way to do it is online. There are several apps through which you can invest easily.
How Much Profit Will You Get?
The first advantage is that of high returns. You get good liquidity even at moderate risk. You can put money in and withdraw it at any time. The disadvantage is the high volatility. Due to market volatility, it can go down up or down 50%. Even if we assume that you won't get a 15% return every year, the average return after 5-10 years will be up to 13-15%.