Mutual Fund Companies in India
What is a mutual fund?
A mutual fund is a pool of money managed by a professional fund manager. Investing in mutual funds offers several benefits such as professional management, diversification, liquidity, low cost, tax benefits, affordability, safety, and transparency. Mutual fund investments when used right can lead to good returns, keeping risk at a minimum, especially when compared with individual stocks or bonds. These are especially great for people who are not experts in stock market dynamics as these are run by experienced fund managers.
How does a mutual fund work?
Mutual funds let you pool your money with other investors to “mutually” buy stocks, bonds, and other investments. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities. They’re run by a professional manager who decides which securities to buy and when to sell them.
Advantages of mutual funds
Mutual funds offer numerous advantages that make them a popular investment choice:
(i) Professional Management: A mutual fund is managed by full-time professional money managers who have the expertise, experience and resources to actively buy, sell and monitor investments. This saves you the time and effort required to manage your portfolio.
(ii) Diversification: Diversification means investing in various asset classes, industries, and geographic regions. By diversifying their investment, investors can reduce their exposure to any single asset or market. This diversification helps mitigate risk and potentially improve your overall returns.
(iii) Liquidity: Liquidity refers to the extent to which the fund’s holding can be quickly converted to cash. This flexibility is not always available with other investment options like real estate or direct stock purchases.
(iv) Affordability: Most mutual funds set a relatively low dollar amount for initial investment and subsequent purchase. This allows you to start building your wealth even with limited capital.
(v) Tax Benefits: Some types of mutual funds, like ELSS (Equity Linked Savings Scheme), offer tax benefits. ELSS mutual funds allow you to save tax under section 80C of the income Tax Act, 1961.
(vi) Convenience: Investing in mutual funds is a convenient process. You can invest online through various platforms or through your financial advisor. All you must do is approach a bank or a non – banking financial institution and they will be able to set up a mutual fund account for you instantly.
Disadvantages of Mutual fund
(i) Tax inefficient: Mutual funds with dividend distributions can bring in extra income, but they are also typically taxed at the higher ordinary income tax rate.
(iii) Poor trade execution: Mutual funds trade only once a day at the end of the market, based on their NAV calculated at that time. If you entered a trade to buy or sell shares of a mutual fund, your trade will be executed at the next available net asset value, which is calculated after the market closes.
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Here are the top 10 highest-return companies of mutual funds as of 2024
| Sl.No | COMPANY NAME | 3 YEAS RETURN |
| 1. | Quant Infrastructure Fund Direct-Growth | 47.66% |
| 2. | Aditya Birla Sun Life PSU Equity Fund Direct-Growth | 44.72% |
| 3. | Quant Small Cap Fund Direct-Growth | 44.03% |
| 4. | ICICI Prudential Infrastructure Direct Growth | 43.41% |
| 5. | Quant Infrastructure Fund Direct Growth | 42.77% |
| 6. | Quant Small Cap Fund Direct Growth | 41.81% |
| 7. | Invesco India PSU Equity Fund Direct-Growth | 41.7% |
| 8. | Nippon India Power & Infra Fund Direct-Growth | 40.85% |
| 9. | Quant Mid Cap Fund Direct-Growth | 38.29% |
| 10. | Quant ESG Equity Fund Direct-Growth | 33.66% |
Mutual funds are one of the top most wealth creators since the time they started becoming popular in the 90’s. Example: If someone invested 1000 rupees in the fund consistently for the last 20 years, he/she would have invested around 2,40,000 in this fund. Your 2,40,000 investment would have a value of a staggering 48,00,000 as of today.
CONCLUSION
Mutual funds offer a smart way to get into investing without needing to understand everything about the stock market. A mutual fund is a pooled collection of assets that invests in stock, bonds, and other securities.
FAQs
1. Can I break Mutual funds anytime?
Yes, generally speaking, you can sell your mutual fund shares at any time. Moreover, there are no restrictions.
2. What are the risks of mutual funds?
- Returns Not Guaranteed.
- General Market Risk.
- Security specific risk.
- Interest Rate Risk.
- Credit Risk.
- Foreign Investment Risk.
It’s essential for investors to understand these risks and consider their investment objectives, time horizon, and risk tolerance before investing in mutual funds.
3. Are Mutual funds safe?
Or
Why should you read the document carefully?
Mutual funds are generally considered relatively safe investment options compared to individual stocks or bonds, but they still carry certain risks. Therefore it is a good idea to go through document papers carefully before investing.
4. Can mutual funds help in saving?
Yes, mutual funds can be effective tools for saving and investing for various financial goals. Mutual funds, also known as Equity Linked Savings Scheme (ELSS), are great tax-saving instruments under Section 80C of the Income Tax Act, 1961.
5. How long can we invest in mutual funds?
Short-term mutual fund investments are generally meant for tenure of up to 3 years. Long-term mutual fund investments require a minimum tenure of 5 years. Also, You can invest in mutual funds for as long as you want, depending on your financial goals, investment horizon, and risk tolerance.
6. What is the 30-day rule for mutual funds?
To discourage excessive trading and protect the interests of long-term investors, Mutual funds keep a close eye on shareholders who sell shares within 30 days of purchase. In such cases, mutual funds within 30 days are not allowed to claim a loss on their tax return.
My self Anita Sahani. I have completed my B.Com from Purbanchal College Silapathar. I am working in Dev Library as a Content Manager. A website that provides all SCERT, NCERT 3 to 12, and BA, B.com, B.Sc, and Computer Science with Post Graduate Notes & Suggestions, Novel, eBooks, Health, Finance, Biography, Quotes, Study Materials, and more.
