Mutual funds are becoming one of the popular options of investment among investors in the stock market. Nowadays, people are considering investing in mutual funds more than any other financial instrument. Mutual funds help people invest in different asset classes for earning adequate and higher returns thus, bringing diversification in the investment portfolio.
Everyone having short-term or long-term investment plans should consider investing in mutual funds. There are different schemes and different funds available for achieving your financial goals faster. There are different types of mutual funds that are suitable for every person. Let us learn more about mutual funds, their benefits, and ways to invest in mutual funds via a mutual fund app.
What Are Mutual Funds?
A mutual fund is a pool of money invested by different investors having similar financial goals. It is professionally managed by money managers who have expertise in this field. Mutual funds are an excellent investment option for individual investors to manage and diversify their portfolios through different asset allocations. Every investor is allocated based on the fund units they have invested. The performance of mutual funds depends on the assets underlying. However, the main motive of mutual funds is to provide good returns by investing in those securities that sync with the fund’s objectives.
There are three types of mutual funds-
- Equity mutual funds
- Debt mutual funds
- Balanced or Hybrid mutual funds
Benefits of Investing in Mutual Funds
There are several benefits of investing in mutual funds. Some of them are given below.
- Cost-effective- For small investors, a mutual fund is a cost-effective method of investment. You don’t have to buy different securities individually while paying different transaction charges.
- Systematic Investment Plan (SIP)- You can invest in mutual funds systematically by investing small amounts every month via a SIP. You can decide the frequency of your SIP whether you want it monthly, quarterly, or annually. Also, you can decide the ticket size of the investment
- Managed by expert managers- Your investment portfolios are managed by excellent professionals who already have an extensive research analysis on every security available in the market. Their knowledge about stock markets is very adequate and deeply researched. They know how to pick the best stocks at the right time for earning maximum returns.
- High liquidity- Mutual funds are high-liquidate in nature. At the time of a financial crisis, the investors can fall back on the mutual fund investments. Redemption request is accessed quickly and money is transferred into your bank account in 3-7 working days.
- Diversification- It is very important to keep your investment portfolio diversified. If one asset class is not performing well then you can rely on others as well. Therefore, you don’t have to worry about market volatility, a diversified portfolio will bring stability in your returns from different arenas.
- Flexibility- Mutual funds have great flexibility as compared to other investment options. People consider investing in mutual funds for accumulating short-term emergency funds so that they can redeem them at their convenience.
- Track your funds easily- One more benefit of mutual funds is that it provides quick tracking of your investment. It is difficult for the investors to track their finances therefore, fund houses provide them regular investment statements. Also, investors can track their investment through a third-party’s portal.
How to Invest in Mutual Funds through the Mutual Fund App?
Nowadays, everything is available through smartphones. You can also invest in mutual funds via a mutual fund app. Many fund houses provide different online trading platforms for their customers so that they can start their investment from anywhere. You can download a mutual fund app suggested by your DP.
However, you can also invest through their website. You just have to visit your fund house or broker’s website and follow the instructions mentioned in them. Fill up the application form and submit necessary documents such as an Aadhar card or PAN card for the KYC verification process. Once the verification is done you will be provided with the necessary details and identification number to begin investing in mutual funds. The online process is quite easy, simple, and hassle-free for new investors.