Index Fund Corner
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| Scheme Name | 1-Year Return | Invest Now | Fund Category | Expense Ratio |
|---|---|---|---|---|
| Axis Nifty 50 Index Fund | +32.80% | Invest Now | Equity: Large Cap | 0.12% |
| Axis Nifty 100 Index Fund | +38.59% | Invest Now | Equity: Large Cap | 0.21% |
| Axis Nifty Next 50 Index Fund | +71.83% | Invest Now | Equity: Large Cap | 0.25% |
| Axis Nifty 500 Index Fund | — | Invest Now | Equity: Flexi Cap | 0.10% |
| Axis Nifty Midcap 50 Index Fund | +46.03% | Invest Now | Equity: Mid Cap | 0.28% |
Mutual funds have become very popular among individual investors because of all the benefits, including diversification across multiple stocks and other instruments, gold, debt, liquid funds, and more. With the industry now witnessing an evident boom in India, here’s how one can begin the journey in mutual fund investment.
What are mutual funds?
A mutual fund is an investment platform that collects money from investors and invests it in financial securities like bonds, stocks, money market instruments like gold, etc. Mutual funds are run by investment professionals, allocating these funds to generate revenue or capital gain for the investors. The way to start investing in mutual funds is by building a mutual fund portfolio — a collection of funds that will help meet your investment goals. The overall returns will depend on the product portfolio.
It is worth mentioning that diversification in mutual funds reduces the risk as the stocks may not move in the same direction in the same proportion at the same time. Also, the profit and losses are shared by the investors in proportion to their investments.
Note: A mutual fund is required to be registered with the Securities and Exchange Board of India (SEBI). The body takes care of the securities market before it can collect funds from the public.
Types of mutual fund schemes:
Mutual fund schemes can be divided into open-ended schemes and close-ended schemes based on the maturity period. While an open-ended scheme is available for subscription and repurchased continuously with no fixed maturity period, a close-ended scheme has a stipulated maturity period and is open for subscription only during the specified period at the time of its launch.
Schemes can also be classified on the basis of the investment objective and they can be either open-ended or close-ended, as per the National Institute of Securities Markets. Those with long-term goals can go for equity funds, whereas those with medium or short-term goals can choose between debt funds or liquid funds.
One can also go for a systematic investment plan (SIP) as it allows one to invest in mutual funds at regular intervals.
The process of investing in mutual funds
Mutual funds are usually released with an advertisement in newspapers with the date of the launch of new schemes. Investors can also reach out to the agents and distributors of the schemes and take other information and application forms. These forms can be deposited with mutual funds through agents who provide such services. Nowadays, post offices and banks now also distribute units of mutual funds.
The mutual fund works when an asset management company (AMC) collects investments from investors and pulls them into bonds, equities, and other assets, further issuing units against these funds. They are flexible as any person with a surplus of ₹ 500 per month can invest in mutual funds.
For tax saving purposes, one can invest in equity-linked saving schemes mutual fund which allows a deduction of up to ₹ 1.50 lakh on taxable income under section 80C of the Income Tax Act. Investing in the ELSS will make the unit fall under a lock-in period of three years.
Key things for mutual funds in India
– One must always plan the financial goals making detailed plans about what they want to achieve with the investment.
– Keeping the risk tolerance will help to understand the extent of risk investors can afford to take.
– Understand your investment horizon to understand how long you plan to invest in mutual funds.
– Your current financial situation is also important to understand how much money you have available to invest.
Mutual funds can be a smart move to grow your wealth, with the Indian mutual fund industry gaining momentum in recent years and Sebi’s measures to boost mutual fund penetration.
