For those people, who do not know much about investing in the stock market, mutual funds are a good option for them. Mutual Fund companies raise money from investors. They invest this money in those stocks. Instead, the Mutual Fund also charges the investors.
If you directly invest a website of a mutual fund, you can invest in the “Direct Plan” of the Mutual Fund Scheme. The advantage of investing in a Direct Plan of a Mutual Fund is that you do not have to pay a commission. That’s why your return to long-term investments increases very much. But, one such problem with investing in the Mutual Fund in this way is that you have to research yourself.
If you are investing with the help of an advisor, then you invest in a “Regular Plan” of a Mutual Fund scheme.
Equity Mutual Fund
Equity Mutual Fund schemes invest the funds of investors directly into equity shares. These schemes can be beneficial in the long run. Your return from investing in this type of Mutual Fund scheme depends on how the stock’s performance is.
According to SEBI’s instructions, the mutual fund scheme, which invests in 65% of its fund, is called equity mutual fund. They are also known as Growth Funds.
There is a fund manager who selects and invests in the investment stock after adequate research. Equity funds are active or inactive. In an active fund, the fund manager examines the market, researches companies, examines their performance, chooses the best options. In the passive fund, the fund manager creates a portfolio that matches the prevailing popular market indexes such as Sensex or Nifty Fifty.
Equities are divided according to its market capitalization, that is, the capital market assesses the valuation of a company’s entire equity. Funds can be large caps, mid caps, small and subtle.
Popular Equity Mutual Funds
- Debt Mutual Fund: These Mutual Fund schemes invest in debt securities. Investors can invest in these to meet short-term financial goals. It is okay to invest in these for less than five years. These Mutual Fund schemes are less risky than shares and give better returns than fixed deposits of the bank.
- Hybrid Mutual Fund: These Mutual Fund schemes invest both in equity and debt. It is important for investors to take care of their ability to take risks while choosing these schemes.
- Solution Oriented Mutual Fund: This scheme is based on a specific goal or solution. These can be goals like a retirement scheme or a child’s education. In these schemes, you have to invest for a minimum of five years.