Mutual Fund

Paisa Invest – Best Mutual Fund Consultant in Kolkata, India

What Is Mutual Fund?

Every individual has a financial objective to achieve irrespective of his/her income level and nature of income and for that certain investment options are there ranging from F.D, Post Office saving schemes, government and corporate bonds etc. Apart from that people also invest in instruments like Mutual Funds.

A retail investor often doesn’t have the time and expertise to invest on his own on different investment options like bonds and shares directly. In that case, mutual funds play a very crucial role and mitigating the problem of the retail investor. A mutual fund acts as a fund’s manager and allocator and has the expertise to do it which makes a retail investor rely on Mutual Fund.

In other words, Mutual Funds act as an intermediary for a retail investor to invest in the various sectors according to the need and requirements of the investor.

Mutual Funds allows an investor wide options of investment instruments collectively and also make the degree of risk flexible at what the investor is ready to invest. The various sectors in which mutual fund allows an investor to invest are mainly Debt and Equity Shares.

Role of Asset Management Companies In Mutual Fund

Certain Asset Management Companies have their own criteria of Mutual Funds specifying where they invest what proportion of the entire investment fund and the rate of return it provides which is not fixed. The thumb rule is that, the higher the risk one is willing to take the chances of more returns are also high.

An aggressive Mutual Fund tends to invest a larger fraction of the investment fund on Equity whereas a conservative Mutual fund will invest a larger fraction of the investment amount on Bonds. Such characteristics of Aggressive Mutual Fund and Conservative Mutual Funds differentiate them by the degree of risk and rate of return.

An equity-focused Mutual Fund is riskier but at the same time, it is high yielding and vice, versa with a conservative Mutual Fund. This widens the investment proportion for an investor and makes it flexible to manage their funds.

There are Mutual Funds Focusing on certain Segment of equity such as the I.T sector Mutual Funds where the allocation of funds is concentrated on the equity shares of companies where are into IT sectors. The same is the process with Pharma, Infrastructure, Consumer, Natural Resources, Power, Global Fund etc. Mutual Funds. Such kinds of Mutual Funds is known as Sectoral or thematic Mutual Funds.

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Role Of Mutual Fund In Tax Saving

Apart from sectoral Mutual Funds, there are Mutual Funds that have definite characteristics and specialization.

Some Mutual funds are concentrated towards tax savings such as Equity Linked Saving Scheme (ELSS) Mutual Funds. Such Mutual Funds have a lock-in period of 3 years and after that, it is redeemable and can be switched as well. Under ELSS, Investments made up to 1.5 Lakh is eligible for a tax deduction.

Types Of Mutual Funds

Large Cap Mutual Fund

These are equity funds that invest a bigger proportion of their total assets in companies with a large market capitalization. These companies are highly reputed and have an excellent track record of generating wealth for their investors over a long period

Flexi Cap Mutual Fund

A flexi-cap fund is a type of mutual fund that is not restricted to investing in companies with a predetermined market capitalization. This type of fund structure will be indicated in the fund’s prospectus. A flexi-cap fund can provide the fund manager with greater investment choices and diversification possibilities

Mid Cap Mutual Fund

It allocates larger fraction of the funds in the equity shares of companies that have Mid-market capitalization. Normally, the companies which are ranked from 101 to 250 respective to the market capitalization are considered as Mid-Cap Companies.
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BA Mutual Fund

Balanced Advantage Mutual Funds allocates the funds of an investor in a certain proportion among Debts and Equity where the risk and returns are well balanced and the investor gets exposure to invests in both Equity and Debts.

Small Cap Mutual Fund

It focuses on the allocation of funds mostly concentrated in the equity shares of companies that have a small market capitalization. Companies that have a market capitalization of less than Rs. 5000 Crore are considered to be Small Cap Companies.

Open End Mutual Fund

Open-ended mutual funds are eligible for redemption, withdrawal or switch throughout the year and the investor has the freedom and flexibility of his/her funds at any given point of time incurring the benefits or loss at that given point time on his/her investment funds.

Criteria Of Investing In Mutual Funds

Systematic Investment Plan (SIP)

A Systematic Investment Plan is basically the process of investing into Mutual Funds in Regular Intervals which makes it easier for an investor to invest in Mutual Funds at a steady flow in multiple which eliminates the task of collective funds at once. Anybody can enter the SIP market as the minimum amount required to begin your investment is Rs. 500 only.

There are options that allow you to pause a SIP investment if you face any financial crunch and it also enables you to resume investing as per your convenience.

Lump-sum Investment Plan (LIP)

It refers to the investment process where an investor invests the whole amount of investment at once. The rate of return come in to effect on the entire amount from the first year and unlike SIP it doesn’t need to be accumulated over a period of time.

A good thing about Lump-sum investment is that investors are allotted mutual fund units in large quantities in reasonable options with the investment amount and also depending on the fund’s current net asset value.

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