As a result of its iconic advertisement campaign “Roz Khao Ande”, the National Egg Coordination Committee, which led to increased egg consumption in India, AMFI’s highly publicized “Mutual Funds Sahi Hai”, campaign attracted approximately 50 lakh retail investors within a span of just 12 months.
AMFI’s new advertising campaign promises more transparency and has generated national interest in mutual funds investments. This gives nascent investors confidence to explore an otherwise unknown investment tool.
The Mutual Funds Sahi Hai campaign provides information, but questions such as ” What are mutual funds?” How do mutual funds work? – Remain in the minds and hearts of the next generation of investors.
This document is all you need about mutual funds . It covers everything from the basics to the different options and plans.
Basics of Mutual Funds Investment
Although it is difficult to know when and where to invest, mutual fund basics are easy. As the name suggests, mutual funds are a pool or shared funds that have been sourced from multiple investors. An Asset Management Company (AMC), or the fund manager/s, manages the money and invests it in various money market products such as stocks, corporate bonds, and government bonds. On a daily basis, the fund manager/s monitor the money that is invested in various instruments. This portfolio forms the mutual fund’s investment portfolio according to the investment objectives outlined in the offer.
You can purchase units of mutual funds as an investor. The amount of units you receive will depend on how much money you invest and the fund’s net asset value (NAV). This is an example:
Let’s suppose you have Rs 100,000 invested in a mutual funds with a NAV of Rs. 100.
This scenario will give you Rs 100,000 / Rs100 = 1,000 units.
Your fund value will increase if the NAV reaches Rs 120.
Tenure of Mutual Funds & Its Asset Allocation Scheme
Information about mutual funds that are subject to maturity options and schemes is the most important. This information is relevant from the standpoint of asset allocation structure. Let’s dive deeper into the different mutual funds available on the market.
Duration Period of Mutual Funds
Mutual funds can be either open-ended, or closed-ended. Closed-ended mutual funds have a 1-year, 3-year or 5-year maturity, while open-ended mutual fund investors can redeem their investments at any time. The AMC transfers both close-ended and open-ended mutual funds to your bank account on an A (trading + 2 (days), basis.
Asset Allocation Scheme
Although there are many mutual fund schemes available, AMCs typically follow three asset allocation structures: Equity, Debt and Hybrid.
Equity mutual fund invests in equities. This makes them more risky than other investment options. Equity funds are designed to generate capital appreciation and are suitable for investors who have a long-term investment plan.
Portfolios of debt funds include secured investments such as corporate bonds and government securities. This fund is less risky and aims to provide investors a steady return on their investments.
Because of their unique asset allocation structure (a mixture of equity and debt instruments), hybrid mutual funds are very popular among investors. Hybrid funds are a way to make investors happy by providing them with the security of debt instruments and capital appreciation.
Consult a financial advisor if you’re new to the game to find out more about your risk profile, investment options, and other information.
