Introduction
Mutual fund is a fund manager who manages the funds and invest in various sectors like gold, silver, stocks, ETFs, debt funds, etc and keeps the records of a profit & loss. And this profit and loss are shared in a investor. And those who have a zero knowledge in stock market can also invest in mutual fund. This is a simple method from where you can become millionaire from Mutual fund.
What is AMC?
This type of company invests the funds of their investors in a various instruments like equity, gold, bonds, etc and the profit which gets from the investments are shared between the investors in the form of fund units. A good fund manager can get maximum returns by investing the fund properly, due to which the investor will get good returns.
How mutual fund works, in detail-
The main advantage of Mutual fund is that you don’t need a huge and heavy money for investment. You can also start with only 500 rupees.
For example, if you want to invest in stock market and the share price is 15000 rupees of a single stock, then you cannot invest with a 500 rupees. So you can invest through Mutual fund. Mutual fund manager takes a 500-500 rupees from a many investor and invests that huge money in a company.
Advantages and Disadvantages
Advantages of Mutual fund
You can start SIP in mutual funds with Rs 500 or Rs 1000 also. You can also decide at what intervals you will invest in it that will be weekly, monthly, quarterly, yearly and so on. In this way, after some interval of time or after some years you can collect a big money from mutual fund.
A big advantage of mutual funds is that it invests your money in different sectors and assets. For example, in banking or Pharma sectors performs negative then also it will not affect your entire portfolio because the fund manager is that it invests your money in different sectors and assets.
By investing in mutual funds, you do not need to think about the growth of the company in which you are investing, this work is done by the fund manager.
There are some Tax saving funds are also there in mutual fund where you can invest and save the taxes.
Disadvantages of Mutual fund
If you need of emergency funds, then you have to exit and redeem the amount and wait it for 3-4 days. And here, if market is in negative and your position of mutual fund invested is in negative then you have to take that loss also.
How to invest in Mutual Funds
First of all you have to decide that you will invest in lumpsum or have to start the SIP.
In SIP that is systematic investment plan you have to fix the amount that you will be invest per month and for how many years. In SIP the power of compounding works very better. You can invest in various funds like Large cap funds, Debt funds, Index funds, Mid cap funds, etc.
For example if you invest 1000 rupees per month for 30 years at the annual return of 16 to 17%, the total expected funds you will get more than 1 Crore+. You can also use SIP calculator for calculating the expected returns.
You can make a SIP for various purpose like you can invest for Home, Car or higher educational purpose. You can also plan and invest for retirement funds.
In lumpsum, You have to make a investment in one stroke. It’s always be better than the FD (Fixed Deposit). Most of the top performing funds can also give upto 20 to 25% annual return.