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Mutual funds are one of the most buzzing investment options among millennials these days. We have covered the following in this article:

1. What are Mutual Funds?

A mutual fund is an investment vehicle which pools investments from several individuals and institutional investors with similar investment objectives. The pooled investment is managed by a finance professional called the fund manager. Mutual funds invest in capital assets to provide investors with attractive returns on their investments. Fund managers have an excellent track record of managing investment portfolios as they have a deep understanding of how the financial markets play. They analyse the market developments and take decisions accordingly.

Mutual funds can be classified into three categories; debt funds, equity funds, and hybrid or balanced funds depending on their equity exposure. Debt funds are those funds that invest in money market instruments such as treasury bills, certificates of deposits, debentures, among other things. Equity funds are those that invest in shares of companies across all market capitalisations. Hybrid or balanced funds are those that invest across both debt and equity instruments.

Out of all the categories of mutual funds, the equity funds are considered the riskiest as they invest in equity shares. Also, equity funds have the potential to offer the highest returns among all mutual funds. Debt funds are considered the safest class of mutual funds as they invest in relatively safer instruments, these funds offer stable and not so high returns. Balanced mutual funds balance the risk-reward ratio by investing across equity and debt instruments.

2. What is Mutualfundssahihai?

Every investment has both ups and downs, so do mutual funds. Investors must assess their requirements and risk profile before deciding to invest in any investment option. The Association of Mutual Funds in India (AMFI), a self-regulatory body formed by the mutual funds in India has come up with a campaign named ‘MutualFundsSafhi’.

The main objective of the AMFI is to promote mutual funds in India by improving the ethical and professional standards in the industry. MutualFundsSahiHai is run by the AMFI and is trying to create awareness among the investors. It is promoting mutual funds in various channels, the most prominent being the television advertisements. The AMFI is making people understand how powerful mutual funds can be in the planning of the future life events of an individual.

3. Brand Ambassadors of Mutualfundssahihai

AMFI, after realising the potential investors in the country, has taken steps to attract them. The AMFI has now appointed cricket legends Sachin Tendulkar, Mithali Raj, and Mahendra Singh Dhoni as its brand ambassadors. This decision was taken as cricket is one of the most popular sports in India and there is no other sport capable of reaching out to potential investors.

The MutualFundsSahiHai campaigns have so far been successful in ringing the behavioural changes and the way the investors look at mutual funds in India. With the appointment of new ambassadors who are a prominent figure in the country, MutualFundsSahiHai is expected to attract more investors in the coming days.

4. Benefits of Investing in Mutual Funds

The most significant benefit of investing in mutual funds is that the investors are entrusting the expertise of the fund manager to provide maximum returns on their investments. The fund managers, more often than not, are so far successful in generating excellent returns as per the investment mandate they have received by the investors.

Furthermore, anyone can invest in mutual funds, this includes even those not having any market knowledge. This is made possible due to the fact that the fund manager takes care of everything. Mutual funds have the potential to provide inflation-beating returns, which most other investment options are not capable of.

There are mutual funds that suit almost all kinds of investors. Risk-averse investors may consider investing in debt funds. Investors willing to take higher risk in exchange for higher returns can invest in equity funds. If investors want to park their surplus funds, then they may consider investing in liquid funds (it is a type of debt funds) and earn much higher returns than what a regular savings bank account offers.

If investors are looking for long-term investments (seven years and more), then they may consider investing in equity funds. When investors invest in equity funds with a long-term horizon, they will beat market volatility and get the benefit of scaling. Therefore, equity funds are an excellent option to plan long-term requirements such as higher education and marriage of children.

5. Conclusion

Mutual funds are one of the best investment options available in the market for investors. There are mutual funds suitable for every investor and the individuals must assess their requirements and risk profile before picking any. If you are finding it difficult to pick the right mutual fund, then get in touch with us at support@cleartax.in. Our in-house experts have handpicked the best performing mutual funds among the top fund houses in the country.

FAQs

Q. Who can invest in mutual funds?
A. Anybody who has completed the KYC process can invest in mutual funds.

Q. What are mutual fund houses?
A. Mutual fund houses are financial institutions that pool money from investors and purchase capital assets and securities on behalf of them, with a view of making profits.

Q. Is MutualFundsSahiHai a mutual fund scheme?
A. No, it is not a mutual fund scheme. MutualFundsSahiHai is a mutual fund awareness campaign run by the Association of Mutual Funds in India (AMFI).

Q. What is AMFI?
A. The Association of Mutual Funds in India (AMFI) is a self-regulatory body formed the mutual fund houses in India. It was established to set the industry standards and drive it ethically.

Q. What are the types of mutual funds?
A. Mutual funds are broadly classified into equity funds, debt funds, and hybrid or balanced funds depending on equity exposure.

Q. What is SIP?
A. Systematic investment plans (SIPs) are a method of investing in mutual funds. SIPs allow investors to invest a nominal sum on a regular basis. The frequency of investment can be weekly, monthly, quarterly, and bi-annual basis.

Q. Are SIPs the only way of investing in mutual funds?
A. Lump sum and SIPs are the ways in which an individual can invest in mutual funds.

Q. Are all mutual funds exposed to market risk?
A. No, debt funds are not exposed to market risk as they don’t invest in equity shares of companies. They invest in only money market instruments which are not exposed to market risk.

Q. Should I make decisions of buying, selling or holding on to securities?
A. No, the fund manager will make all the decisions relevant to buying, selling, and holding securities. Investors just have to invest their money.

Q. Who are fund managers?
A. Fund managers are finance professionals having an excellent track record of managing investment portfolios. They are the individuals with certifications such as CFA, NISM, among others.

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