Mutual funds are investment opportunities wherein a group of people (investors) pools their Money from many investors to purchase securities. This large corpus is then invested into various companies across industries, operating in different sectors of the economy – depending on the type of fund chosen. All the investors of a mutual fund share in its profits, losses, incomes, and expenses in direct proportion to their level of investment.
The mutual fund scheme is run by a fund manager who decides where the fund will invest. This type of investment schemes varies the risk undertaken by the investor and tries to maximize returns and minimize risk.
Any amount invested in mutual funds will either grow or shrink depends on market performance and the skill of the fund manager.
Types of mutual funds:
- Equity Funds: The Equity fund is also known as Stock funds. Main focus of equity funds is to invest at least 65% of the total corpus into stocks and equity related instruments of different companies.
- Debt Funds: The primary focus of Debt Funds is to invest a majority of its fund in Debt Instruments or Fixed-Income, such as Govt. Securities, Debentures & Corporate Bonds, Treasury bills, Money market instruments, and other debt securities.
- Hybrid Funds: The Hybrid funds is also known as Balanced Fund. These funds invest in Equity and Debt instruments.
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However, many investors, including those who have already made SIP investments in mutual funds, are often confused about SIPs.
What is SIP?
A SIP or a Systematic Investment Plan allows investors to invest a certain amount at regular intervals like weekly, monthly, quarterly, yearly in equity mutual fund schemes. But Many People think that SIP is a product. A SIP and mutual fund schemes are not same, they are different.
SIP is only a tool that helps the investors in investing regularly in various investment schemes, especially in equity mutual fund schemes…
What are the other benefits of SIPs?
- SIP’s help the investors to average out their purchase cost and maximise the returns.
- When you invest regularly, irrespective of the market conditions, Over a period of time, you would get more units when the market is low and less units when the market is high.
- When you invest over a long period and earn returns on the returns earned by your investment, your money would start compounding. This helps you to build a large corpus that help you to achieve your long-term financial goals with regular small investments.