, and specifically , as a way to have been around for a while. Their popularity in India is nonetheless a more recent phenomenon. This article will help you make sense of what are, and specifically, how they help you.
What are mutual funds?
Abasically pools money from multiple investors, such as you, and them in baskets of . These baskets form what is called a portfolio.
This means, your money is invested in a group of debt funds, and money market funds on the basis of where they .(either stocks or debt instruments), and in a simple, as well as accessible manner. On a basic level, are classified as ,
are the most numerous as well as popular form of you will come across.
What are Equity Funds and how do they work?
the pooled investor money into shares of various companies. The gains or losses arising from the rise or drop in prices of these shares in the stock market decide the performance of the .
When an investorin an , the price that they pay for each unit of the fund is the ).
Net Asset Value is the book value of the fund. Book Value is the difference between what theowns (assets) and what the owes (liabilities). The assets are shares that the fund bought. Liabilities are made up of expenses that are incurred for running the .
The NAV is directly impacted by the price fluctuations in the stock market.
Theactivities of a , equity or otherwise, are professionally managed by fund managers. These fund managers are capable as well as qualified individuals who are selected after a thorough review.
How can you invest in mutual funds?
in can be made in two ways
1. One time: If you have extra money, a lump sum amount that you want to put away for future use, you can it all at one go.
2. Systematic Investment Plan (SIP): If you save small amounts from your monthly salary, systematicare a good way to . It allows you to your money in a hassle-free and disciplined manner. The primary benefit of a SIP is that it builds discipline and helps you start even if you have small amounts to .
Wondering which one is the better way to go?
How do you benefit from investing in Equity Mutual Funds?
You gain in the following ways:
1.Growth in NAV:
Net Asset Value of the fund increases if the market value of funds portfolio holding increases (after subtracting its liabilities and expenses). Growth in NAV denotes the higher value of investor’s capital. The profit investor makes here stays reinvested to earn more money.effect helps the investor with long-term growth.
2. Dividend Payout:
Whenearns profit in the form of on the underlying stocks in its portfolio holding, it pays investors in the form of payouts. Ideally this should be reinvested (by going for a growth option) in the fund to gain from .
In case of, gains after a holding period of one year are considered long-term gains and are exempt from taxes. Also, on are tax-free in the hands of investors.
Among the wide range of tax saving equity funds which come with a of 3 years that help initial investors to save on tax. in this particular is eligible for under section 80C of the Act.available, there are
To conclude,offer widespread to investors with a medium and high risk appetite. Under the well regulated industry framework, it provides access to professional fund managers with a low transaction cost.
This makes here.a good choice for initial and small investors with the long term goal of growth in wealth at a higher rate of return. If you want to get started with , Scripbox long term wealth is something you can consider. You can learn more about why Scripbox makes sense for you,
About the Author:
Rupanjali Mitra Basu is the Founder and Chief Training Enthusiast of FinProWise, a Financial Training and Content Shoppe. She has more than 12 years of training experience with a focus on Content in the BFSI Space.120