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‘’MUTUAL FUNDS ARE SUBJECT TO MARKET RISK PLEASE READ ALL THE INFORMATION DOCUMENTS CAREFULLY” 

A line which we all have heard several times and do hear it in daily routine. Let us understand the meaning of the first two words of this line i.e., MUTUAL FUNDS.

Technically mutual fund is an investment fund that pools money from many investors to purchase securities. Let us understand this in layman language with an example:-

Let's suppose Mr. X wants to purchase stocks of MRF company ( stock price being 1 lakh for 1 stock).
Mr. X wishes to invest only Rs. 50,000  Now in this case Mr. X can invest this money in mutual fund similarly many people will invest in mutual fund and the mutual fund house also called asset management company(AMC) will have a large pool of money at its end to invest and then they will invest in various different companies dividing Mr. X’s investment (Rs. 50,000) in different companies giving him opportunity to get invested in many companies which otherwise would not have been possible for him.
This is the beauty of Mutual funds. It helps you to reduce the possibility of losses ( reduce risk) by diversifying the investment in various companies of various different sectors.

There are over 40 AMCs currently in India managing funds of over 40 lakh crores. The fun fact is that only 15% people are currently investing in mutual funds. It is a growing industry with a great upside potential and the way ahead to wealth creation. This is one of the best tool to beat inflation in long run which is a big concern in todays world.
Lets talk about how you can invest in mutual funds. The process is simple and is as followes:

You need to get your kyc registered without which investment is not possible.
Select the fund you wish to invest in debt or equity
Select the way you wish to invest. Broadly there are 2 ways:
A lumpsum : If you wish to invest your amount in one go then lumpsum is the way.
B SIP : If you wish to invest small amount on monthly basis then SIP is the way.

This is the basic idea behind what exactly mutual fund is and how you can invest in it .

I hope this write up was useful and will help you understand about mutual funds.

- Sanjay Chandwani & Purva Goyal Chandwani

We specialise in generating good returns and managing your portfolio as per your needs and resources.

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