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Mutual funds and it’s revealing secrets

Mutual fund investments are subject to market risks

We all know about the fact that mutual fund investments are subject to market risks in spite of this, we are searching for the best mutual fund options to invest our money.
The main reason for the popularity of mutual funds are:-
  • We trust over the market to get high returns over time
  • Our limited knowledge to directly enter the market
  • Qualified experts associated with mutual fund investment firms.
Mutual funds
Mutual funds are subject to market risk but adorable to many of us.

History of mutual funds in India

The origin of mutual funds in India started with UTI (Unit Trust of India) in the year 1963. It requires to physically buy and sell the fund schemes by visiting the nearest office

I still remember, my mother usually travel to ITO office for every transaction

But now, everyone can not only accesses their favourite schemes. Moreover,  they can transact in schemes through their online account within a minute. 

Consequently, it is the main reason for the tremendous growth of the mutual fund industry.

Facts and figures on Indian Mutual funds Industry

According to a study on the Indian Mutual Fund Industry (IMFI) undertaken by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), it is highlighted that Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for April 2020 stood at ₹ 23,52,878 crore.

Particularly, the AUM of the Indian MF industry has grown from ₹ 8.09 trillion as on 30th April 2010 to ₹23.93 trillion as on 30th April 2020 about 3 fold increase in 10 years.whereas,

The MF Industry’s AUM has grown from ₹ 11.86 trillion as on 30th April 2015 to ₹23.93 trillion as on 30th April 2020, more than 2 fold increase in 5 years.

Thereby, the mutual fund industry in India become bigger than the GDP of  many countries in the world

Classification of mutual funds

1. Category of Mutual fund
  • An open-ended fund  The key advantage is to conveniently buy and sell units at net asset value (NAV)-related prices. Moreover, there is no fixed maturity period.
  •  A close-ended fund   – On the contrary of the open-ended fund, It comes with a fixed maturity period varying from 2 to 15 years.  Generally, one can buy at the time of the initial issue/launch of the scheme and sell after the maturity period.
2. Options of Mutual fund
  • Dividend option–  It implies that the fund gives regular cash as a dividend. However,  the NAV comes down on the declaration of dividend.
  •  Growth Option – In growth option, the declared dividend adds to your investment and subsequently,  investment compounds itself.

Important terms that every mutual fund investor should know

1. Net Asset Value (NAV) –  It can be found by subtracting fund liabilities from the market value of the assets of the scheme in respect to the total number of units outstanding

Net Asset value of mutual funds
Net asset value can find by subtracting fund liabilities from the market value of the assets of the scheme in respect to the total number of units outstanding

2. Sale Price – A price that you pay to invest in a scheme. is called Sales Price or Offer Price.

3. Repurchase Price –  It is the price related to NAV are repurchased by the mutual fund under open-ended schemes 

4. Redemption Price – The price at which close-ended schemes redeem their units on maturity.  

5. Sales Load –   It is also called ‘Front-end’ load and a charge collected by a scheme on the selling of the units, on the contrary, schemes that do not charge a load are called ‘No Load’ schemes.

6. Repurchase or ‘Back-end’ Load – It is a charge collected by a scheme
to buy back the units from the unitholders.

How to find the best mutual fund?

It is true that one can get the results by investing in mutual funds but not all mutual funds are the same.

Their ranking varies on the basis of result and performance and due to various financial websites such as Yahoo Finance, Moneycontrol etc. Above all. you can easily find the ranking and performance of various mutual funds.

Moneycontrol
Mutual funds section in moneycontrol website

To begin with any of the financial websites. For instance, we consider the  Moneycontrol.com website to find the ranking of various mutual funds in respect of time. Simple steps to follow:-
1. Go to a webpage – https://www.moneycontrol.com/
2.  Click on Mutual funds menu at the  header menubar

3. The list of top-performing funds with crisil ranking and results with respect to time will appear.

Top performing funds in financial website
How to find the top-performing mutual funds in moneycontrol.com

Finally, choose among the provided options and invest directly by visiting their website. To summarize, follow the below steps to get the best results from your investment in a mutual fund.

Step 1. Fix your requirement on the basis of your goal such as to save tax, invest in Hybrid or equity-focused funds

Step 2. Find the best performing mutual funds in terms of ranking and rating by the help of financial websites

Step 3. Invest regularly for a long time period to get the returns.

Is mutual fund investment a better option than the direct market investment?

Mutual fund investment is the better option for the investors who don’t want to invest their time for research and analysis of the market.

On the contrary, a direct market investor spend most of their time to check the financial health of a company

In terms of return, a value investor gets a much better result from the mutual fund investor.

After all, the mutual fund also invests in the market with the help of market experts but mutual fund investor has to share the profits with the team.   

Conclusion

Somehow, it is better to connect with the market either by investing directly or through mutual funds to get better returns than the safe investment instruments such as bonds, fixed deposits, etc.

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