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A mutual fund is a professionally managed investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities  in accordance with objectives as disclosed in offer document. This article covers all the articles that have covered in depth by us at bemoneyaware which talks about basics of Mutual funds, Comparing Stocks vs Mutual Funds, How to Directly Invest in Mutual Funds, How to Choose Mutual Funds, What are returns of Mutual Funds,  How to Nominate and Claim MF Units.

What are Mutual funds

Mutual funds have a fund manager and a team who invests the money on behalf of the investors.  With mutual funds, one can invest minimum amount (at times as little as Rs 100) which are spread across a wide cross-section of securities giving one advantage of diversification. Buying a mutual fund is like buying a small slice of a big pizza. The buyer of mutual fund gets a proportional share of the fund’s gains, losses, income and expenses. The advantages of Investing in Mutual Funds:

  • Affordability, 
  • Professional Management, 
  • Diversification, 
  • Variety of Investment ex: Equity, Debt, Return potential, Flexibility, Transparency,
  •  Tax Benefits, 
  • Liquidity, 
  • Clear – Cut regulations [SEBI]

Stocks vs Mutual Funds

Invest in Equities screams the personal finance literature(newspapers, magazines, blogs). If one wants to invest in equities there are two ways, Stocks and Mutual Funds. In this article, we shall explore why is it recommended that one invests in Equities?What are the pros and cons of investing in Stocks, in Mutual Funds?

History of Mutual Funds in India

Mutual funds in India have come a long way since 1964 when the Unit Trust of India was the only player.

By the end of 1988, UTI had total assets worth Rs 6,700 crore. Soon after, eight funds were established by banks, LIC and GIC between 1987 and 1993. The total number of schemes went up to 167 and total money invested – measured by Assets under Management (AUM) – shot up to over Rs 61,000 crore.

In 1993, private and foreign players entered the industry, marking the third phase. The first entrant was Kothari Pioneer Mutual fund, which launched in association with a foreign fund.

The Securities and Exchange Board of India (SEBI) formulated the Mutual Fund Regulation in 1996, which, for the first time, established a comprehensive regulatory framework for the mutual fund industry. Since then, several mutual funds have been set up by the private and joint sectors.

History of Mutual Funds in India

History of Mutual Funds in India

Types of Mutual Funds

There are various types of mutual funds, those that invest in stocks i.e equity and in bonds etc i.e debt mutual funds. Even among Equity Mutual Funds are Large-cap, mid-cap, small-cap funds. Difference between small-cap, mid-cap, and large-cap mutual funds in India is in the type of companies they invest and hence the risk and returns expected from these mutual funds. We need to understand Types of Mutual Funds, risk and return associated with these mutual funds and what type of companies different mutual fund invests in.

Mutual funds invest in different asset classes including equity, debt and gold. Following image shows the different types of Mutual Funds. Comparing types of Mutual funds to Cricket players is shown here.

Types of mutual funds: Are You Making Right Choice

Types of Mutual Funds

Types of Mutual Funds

Types of Mutual Funds in India (Ref: Valueresearchonline.com)

Types of Mutual Funds and Cricket Players

Comparison of Types of Mutual Funds with Types of players in Cricket Team is given later in the article. A large-cap equity fund is like Rohit Sharma, Virat Kohli who would give steady returns in long innings. While Small-cap fund is like a pinch hitter, may give good returns or get out fast! Just like good cricket team need all kind of players so your Mutual Fund should be spread across multiple types of mutual funds.

Comparison of Types of Mutual Funds with Types of players in Cricket Team

Comparison of Types of Mutual Funds with Types of players in Cricket Team

Choosing Mutual Funds

Mutual funds are one of the best investment options available today, as said by media, financial planners. But there are various types of mutual funds, equity funds, debt funds, balanced funds, income funds, index funds etc. with several schemes equity has large cap,small cap, debt funds have short term, gilt. Availability of so many mutual fund categories and schemes in the current volatile markets can put the investor in a fix of how to choose a mutual fund to suit his/her needs Before you make an investment in mutual fund, first you need do some homework. These articles help you.

How to Start Investing in Mutual Funds

Direct Investing in Mutual Funds

Regular and Direct Mutual Fund plans are options to buy the same mutual fund scheme, run by the same fund managers who invest in the same stocks and bonds. The major difference between direct plan and a regular plan is that in the case of a regular plan your mutual fund(also known as AMC) pays a commission to your broker whereas in case of a direct plan, no such commission is paid.

Description Regular Plan Direct Plan
What Investing through distributors Investing directly
Expense Ratio High Low
NAV Low High
Returns Low High
Investment Advice Available Not Available
Market Research Done by distributor/agent Done by self
Portfolio Tracking Done by distributor/agent Done by Self
Compare Direct Mutual Funds Platform ETMoney, PayTm, Groww,Kuvera,Zerodha Coi

Compare Direct Mutual Funds Platform ETMoney, PayTm, Groww,Kuvera,Zerodha Coi

Returns of Mutual Funds

Selling Mutual Funds

Mutual Funds and Tax

When you buy and hold Mutual Funds, if you get dividends, then what are the taxes associated with Dividend from Mutual Funds. When you sell Mutual Funds, whether Equity or Debt you need to consider if you have to pay taxes on profit earned or loss. 

When you sell a mutual fund, the fund house does not deduct the tax from your gain(except for NRI). You have to calculate capital gain tax and pay tax on mutual fund income when you sell the mutual fund either as Advance Tax(if the amount of gains is more than 10,000) or as Self Assessment Tax while filing ITR. The taxability of capital gains depends on the type of Mutual Fund(Equity or Non-Equity) and how long did one hold the MF(Long term capital gain LTCG or Short Term Capital Gain STCG). The taxation of SIP is to be calculated for each SIP instalment.

Capital Gain CAMS Mutual Fund Statements

Capital Gain CAMS Mutual Fund Statements

Paper Work and Mutual Fund

After You Invest in Mutual Funds

How to in Mutual Funds

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