What is a Mutual Fund? Best Mutual Fund Investments, Meaning, Types and Related Terms

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What is a mutual fund in India and its advantages?

Mutual fund meaning

A mutual fund is a collection of investments made by individual investors and used to purchase securities in the capital market. The best part about mutual funds is that a team of experts along with the fund manager picks all the investments to build a portfolio. 

With wide availability of mutual funds schemes, it is easier for an investor to choose the most suited scheme for their financial goals.

Mutual fund advantages

Expert Money Management

Mutual funds are managed by professionals, providing expert guidance. The experts meticulously decide the sectors, allocation of assets, and finally buying of securities.

Diversification

Mutual funds allow an investor to invest in diversified portfolios of equity,  or debt market capitalizations and sectors and even internationally. 

SIP

SIP allows you to invest a fixed amount at regular intervals and help plan your periodic investments. The is flexible and better for mitigating timing risk.

Low Cost

Mutual fund is a cost-effective investment considering the professional expertise, diversity and flexibility. A fee ranging from 0.5% to 1.5% is charged.

Meet Financial Goals

Each investor invests in mutual funds with a financial goal. Mutual funds with diversified portfolios & risk factors help achieve your objectives.

 

Lock-in Period

Lock-in period is the duration for which you are not allowed to redeem the units of the fund. This differs across funds. For ELSS the lock-in period is 3 years.

What are the different types of mutual funds?

Equity mutual funds invest at least 65% of their assets in listed companies across market capitalizations to earn higher returns than debt or hybrid mutual funds. These funds are suitable for investors having high to medium risk-appetite along with an investment horizon of more than 5 years.

  • Sectoral / Thematic – Consumption
  • Sectoral / Thematic – Energy
  • Sectoral / Thematic – ESG
  • Sectoral / Thematic – Ethical
  • Sectoral / Thematic – Infra
  • Sectoral / Thematic – Manufacturing
  • Sectoral / Thematic – MNC
  • Sectoral / Thematic – Pharma and Healthcare
  • Sectoral / Thematic – PSU
  • Sectoral / Thematic – Quant
  • Sectoral / Thematic – Services
  • Sectoral / Thematic – Special Situations
  • Sectoral / Thematic – Technology

Debt funds are mutual funds that invest primarily in fixed income generating instruments providing relatively stable returns. They are comparatively better than the investment options of the same category like fixed deposit, savings bank account etc.

  • Banking and PSU
  • Corporate Bond
  • Credit Risk
  • Dynamic Bond
  • Floater
  • Gilt
  • Gilt with 10 year Constant duration
  • Liquid
  • Long Duration
  • Low Duration
  • Medium Term

Hybrid mutual funds invest in both equity securities and debt instruments seeking diversification. It aims to create wealth in the long run along with income in the short-run through a balanced portfolio.

  • Conservative Hybrid
  • Dynamic Asset Allocation or Balanced Advantage
  • Equity Savings
  • Multi Asset Allocation

International mutual funds invest in equity securities and debt instruments of foreign markets. The advantage of investing in an International mutual fund is of portfolio diversification across countries, economies and market capitalization.

  • International – Others
  • International – Sectoral / Thematic
  • US Equity

Important Mutual Fund Terms

NAV

NAV refers to the market value of a single unit of a particular mutual fund. It is the price at which you purchase the unit of a fund scheme.

SIP

SIP is a process of investing at a regular interval, say monthly for a fixed amount of investment, and helps you plan monthly investments.

Expense Ratio

It is the fee charged by the asset management company in exchange for managing and operating the fund providing professional expertise.

AMC

An AMC is a firm that pools investments from individual investors, invests in capital assets, and manages the fund.

Exit Load

It is the exit penalty or commission charged to an investor if he/ she exits the scheme before the lock-in period calculated on the NAV of the fund. 

AUM

Asset under management (AUM) is the market value of the investments held by the mutual fund.

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Top Mutual funds in india 2020

Invest in the best mutual funds recommended by Scripbox and save your time and effort. The funds recommended are scientifically and algorithmically selected customizable as per your investment goals.

Prominent Mutual Fund Companies in India

TATA Mutual Funds

Kotak Mahindra Mutual Funds

L & T Mutual Funds

DSP Mutual Funds

Franklin Templeton Mutual Funds

HDFC Mutual Funds

ICICI Prudential Mutual Funds

Invesco Mutual Funds

SBI Mutual Funds

Mirae Asset Mutual Funds

Axis Mutual Funds

Motilal Oswal Mutual Funds

How to plan tax saving with mutual funds?

You can save tax and create wealth by investing in mutual funds by investing in ELSS. ELSS invests predominantly in equity securities across market capitalization and industry sectors that aims to provide wealth creation in the long term.

Investment in ELSS is eligible as a deduction upto Rs 1.5 lakh with the shortest lock-in period of 3 years as compared to other tax saving investment option in the similar category.

This way you can save taxes and create wealth with mutual funds.

How to invest in mutual funds with Scripbox?

Time needed: 30 minutes.

Learn how to open an account, choose a plan of your choice and start investing with Scripbox

  1. Sign-in

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  2. Create New Plan

    Select the plan that suits your financial goal

  3. Start Investing

    Click the START INVESTING action

  4. Choose among the best recommended mutual funds

    Set your investment mode, recommended funds and amount

  5. Invest through Net Banking or UPI

    Input your payment details and submit. Or you can schedule your investment for a future date.

Calculate your returns with our calculators

Being an investor planning must always be your very first step towards your investment journey. You can use our tools such as SIP calculator, Lumpsum Calculator, PPF Calculator etc and assess the investment option whether it meets your financial goals or not.

PPF CALCULATOR

Learn how much your investment will grow if you invest in PPF

ELSS CALCULATOR

Learn how much your money will grow by saving tax with ELSS 

FD CALCULATOR

Find out how much an FD will deliver given the rate of interest

RD CALCULATOR

Find out how much an RD will deliver given the rate of interest

NPS CALCULATOR

Learn how much you can accumulate by investing in NPS

INCOME TAX CALCULATOR

Learn how much tax you need to pay given your income

Most Popular Videos on Mutual Funds


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