Mutual Funds (MF) have been a buzzword in recent times. By some industry accounts, the number of mutual fund subscribers in India doubled in less than four years. This steep growth is attributed to many reasons, the chief of them being robust market growth and the ease of investing in mutual funds. If you would like to join this ever-increasing number of mutual fund subscribers and avail the benefits that mutual funds have to offer, then read on.
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What Are Mutual Funds
Prima facie, the concept of mutual funds might seem daunting. But rest assured, that is not the case. In essence, a mutual fund is a pool of monies collected from a large number of sources like retail or institutional investors and then invested in a multitude of investment tools like bonds, securities, stocks etc. Based on the amount invested by each individual, they are allocated units and the gains received are apportioned over the number of units held.
Why Should You Invest in Mutual Funds
Some of the reasons, among many others that make for the massive popularity of mutual funds are:
- Investment as per Affordability – Using the Systematic Investment Plan (SIP), you can start investing in mutual funds with as low as ₹500 per month and keep increasing the amount as per your appetite. You can also choose to invest surplus amounts in lumpsum.
- Ease of Investment – Investing in mutual funds does not involve a lot of paperwork, like in the case of a demat account. With minimal documentation, you can get started. In fact, this can be accomplished online as well. It is relatively easy to track the performance of your investments and switch later on for better returns, once you have achieved a more exhaustive understanding of their workings.
- Tax Benefits – There are several mutual funds that will give you tax benefits under Sec 80C, thus providing you usually better returns than traditional banking tools and savings on tax as well.
- Professional Fund Management – Mutual Funds are managed by professional fund managers with support from market research experts. Their job is to maximise returns while limiting the risks and pick or switch the right instruments to invest the corpus in. This helps you to avoid having to do this on your own, say like in the case of shares.
How to Invest in Mutual Funds
Now that you have a basic understanding of mutual funds and the benefits they provide, let us come to the topic at hand. There are several modes for investing in mutual funds. We will briefly describe them for you.
- Offline Mode – Investing via the offline mode can be done either directly with a fund house by visiting their branch office or through a broker. While investing with a fund house you should consult their site to understand which specific mutual funds you wish to invest and the documentation involved. The advantage a broker provides is additional consulting, guidance on scheme benefits and advice on which ones to invest in. Naturally, there are certain consulting fees that they will charge, but it can be convenient for first time investors. In either case, there will be forms to be filled and standard documentation will include proof of address, proof of identity, PAN card, passport size photograph and a cancelled cheque.
- Online Mode – In today’s tech-savvy world, this is the more preferred method of investing in mutual funds, since it does not require paperwork or having to visit any office. Just like the offline mode, the online mode can also be done either directly through the official site of the fund house or through a brokerage. A key requirement is to complete your KYC (Know Your Customer). In the online mode, it can be conveniently done using the e-KYC facility. The prerequisites will be your PAN and Aadhar cards. You can start investing as soon as your verification is complete, which is much quicker in the online mode. Another important advantage of the online mode is the ability to conveniently track the performance of your fund and understand the allocation of your portfolio.
- App Mode – A subset of the online mode is via mobile apps. These apps provide you with the ability to invest, switch, track and manage your mutual fund’s portfolio on the go. You can also receive guidance consulting or manage your investments on your own. All you need is a web-enabled device and internet. To start your journey of investing in mutual funds you can check out the Dhanush app provided by Ashika Group, which has all the aforementioned features and much more to offer.
Almost 2.5-3 crore Indians are using mutual fund investments to either supplement their incomes or as the main source of their living. In 2020-21 alone there was an addition of 81 Lakh new investors. This is a testament to the popularity of mutual funds as a viable investment tool. There are lesser expenses incurred than some other investment instruments and usually better returns than banking accounts or fixed deposits. Armed with the knowledge from this blog, you are now ready to reap the benefits that mutual funds can provide.