Why Invest in Mutual Funds with Gulaq

Mutual fund is basically a pool of funds, which is managed by professional fund manager whose goal is to minimize the risk and maximize profits.  There is a wide range of mutual funds in India, which is categorized based on investment objective, asset class and structure.

Types of Mutual Funds based on Asset class:

• Equity funds.
• Debt Funds.
• Money Market Funds.
• Hybrid or balanced funds.
• Sector Funds
• Index Funds
• Tax- saving funds

Types of Mutual Funds based on Structure:

• Open- ended Funds.
• Close ended Funds.

Types of Mutual Funds based on Investment objective:

• Growth Funds
• Income Funds
• Liquid Funds

Tax saving mutual funds are those mutual funds with an added tax saving benefit. ELSS is one such tax saving mutual fund scheme.

Most mutual funds are best for long term except liquid Fund.

Non-tax saving mutual funds are taxable

Debt funds are one of the safest mutual funds as they invest in government securities, corporate bonds and treasury bills.

According to data released by Associations of Mutual funds in India (Amfi), the mutual fund industry rose by 13% to Rs. 24 trillion in 2018 by November end. For a new investor, investing in 2019 will be a tough task due to various factors like the general election, future government economic policy and performance of the stock market and the economy. It’s better to take the help from the mutual fund advisors and financial planners.

Each of the mutual fund houses has a particular time period for paying out the dividends.

Yes, LTCG affect the capital gain dividends.

ELSS comes under the income tax act of 80c

No, you cannot transfer mutual fund.

Mutual funds are represented in the NAV (Net Asset Value). The value of the NAV is increased or decreased depending upon the performance of the fund.

Yes, Mutual funds invest in ETFs.

No, A mutual funds cannot invest in private equity.

As any investor invests in mutual funds, she get returns in two ways i.e. through dividend payments and capital gains.

When any investor invests in the mutual fund, then their capital gets appreciated over the course of time. This helps in the growth of the fund.

When an investor decides to purchase that mutual fund, the fund will issue new shares to the investor based upon the current net asset value and redeem the shares when the investor decides to sell.

Mutual funds returns are calculated through Future value.

 Future Value (FV) = Present Value (PV) ( 1+r/100)n

Where FV= Future value of your investment

PV= Present value of current cost of your goal

r= annual rate of inflation

n= time period to reach your goals (in years).

In case of any investment, safety can be ascertained in two ways:

• Safety in terms of offering capital protection and guaranteed returns.
• Safety in terms of credibility of the institutions.

Mutual Funds in India are very strictly regulated by the Securities and Exchange Board of India, making them safest investment options from a regulatory standpoint.

Historically, Mutual funds have given a return of anywhere 12-15% per annum. Inflation on an average has been around 5% for the past one decade or so. Thus, it has clearly beaten the inflation over a good margin.

As an investment tool, Mutual funds provide various benefits: –

• Diversification: – It provides diversification of your portfolio at minimum cost.      
• Low minimum amount: – You can start investing in a mutual fund with a minimum as low as Rs. 500.

Tax benefit: Mutual fund provides tax benefits through various tax saving mutual funds.

There are 19 mutual funds under Karvy. Here are some of the top Mutual funds.

• Axis Mutual Fund.
• Reliance Mutual Fund.
• UTI Mutual Fund.
• LIC Mutual Fund.

For short term investment, an investor should invest in debt funds. Only if there investment horizon is more than 3- 5 years, then they must invest in equity mutual funds.

It’s depended upon the fund house and fund policy. So, before investing make sure to check whether the fund is providing the services of monthly dividends.

There are various investment websites or trading platforms. But there are mainly two basic ways to purchase mutual funds online.

• Investment companies:

The most obvious option is to buy mutual funds directly through the investment companies that offer and manage them.

• Brokerages:

There is also an option to open an account with the help of a brokerage. It will be the most expensive course. Typically, these types of accounts charge a transaction fee/commission for each trade.

• Mutual Fund Distributors:

You can sign up with Distributors like Gulaq who offer Direct Funds with no extra charge

Mutual fund comparison depends upon various factors such as investment objectives, goals and risk of an investor. But there is certain basic parameter to look for in a fund.

• Benchmark: It provides a yardstick against which you can measure your fund performance. It indicates how much returns the fund has generated as against how much it should have delivered.
• Investment Horizon: Your investment horizon becomes a key factor for fund selection and comparison. Investment horizon relates to the time for which you stay invested in the given fund. Afterwards, compare the performance of your mutual fund with another mutual fund during the same investment horizon.
• Risk Factor:  Whenever you make an investment in any mutual fund, you take some risk. The risk related to the vulnerabilities of the NAV as per the overall market performance. According to the investment thumb rule, high risk is rewarded with higher returns. Financial ratios tell us about the rewarding potential of a mutual fund. Beta tells you how much risk is being involved in investing in a fund. Alpha tells you how much return the fund will generate over and above the underlying benchmark. Suppose there is a Fund A and Fund B has an alpha of 3 and 3.5 respectively. Fund B is better because it gives higher risk adjusted returns.

You can sell your mutual funds in following ways:

1. Visit the website of the registered AMC’s which fund you have purchased.
2. Login with your credentials and then redeem your funds.
3. Visit to the distributor website and then select the online funds which you want to transact and redeem your funds.

Investor can purchase the mutual funds either directly with the AMC’s, Online portals, through banks or demat and online trading account.

Mutual funds are attractive to small investors because they offer the systematic investment plan. A SIP allows investors to invest at regular intervals and thus helping in diversification of portfolio at minimum amount.

Mutual funds are better than stocks for several reasons.

• Good and consistent return
• Less risk.
• Less volatility in the prices of NAV.

No, all mutual funds are not liquid. But most mutual funds are liquid.