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Mutual Funds
The mutual fund industry has come a long way from 1993 when the first private sector mutual fund, Kothari Pioneer had come into existence and since then, the industry has scaled newer heights. The private sector mutual funds have shown remarkable growth in the Indian AUMs. It is definitely worth celebrating. The private sector has brought in diversity of product; they also brought in diversity to the customers to invest. This has helped them to grow at a rapid pace.
What are mutual funds?
A mutual fund collects money from investors and invests the money on their behalf.A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus by professional fund managers.
Hence, Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.
Types of Mutual Funds in India:
The Securities and Exchange Board of India has categorised mutual fund in India under four broad categories:- Equity Mutual Funds
- Debt Mutual Funds
- Hybrid Mutual Funds
- Solution-oriented Mutual Funds
Equity mutual fund scheme: These schemes invest directly in stocks. These schemes can give superior returns but can be risky in the short-term as their fortunes depend on how the stock market performs. Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes. The Equity funds are further classified based on various factors like total capital of the stocks like large cap, mid cap ,small cap, multi cap etc and also based on sectors , theme etc.
Debt mutual fund schemes: These schemes invest in debt securities. Investors should opt for debt schemes to achieve their short-term goals that are below five years. These schemes are safer than equity schemes and provide modest returns. There are many sub-categories under the debt mutual fund category.
Hybrid mutual fund schemes: These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his risk appetite. Based on their allocation and investing style, hybrid schemes are categorised into various mutual fund types.
Solution-oriented schemes: These schemes are devised for particular solutions or goals like retirement and child’s education. These schemes have a mandatory lock-in period and are mostly close ended in nature.
How to invest in mutual Funds?
Mutual funds are operated by professional money managers, who allocate the fund’s investments and attempt to produce capital gains and/or income for the fund’s investors.Having said that with various categories of mutual funds the biggest challenge for the investors is choosing the right fund for wealth creation and goals with a balanced portfolio according to the investors risk appetite. Now it gets a little complex does it? Well let’s make it simple for you.
Imagine asking a travel agent, “How should I choose my mode of transport?” The first thing he or she will say is, “Depends on where you want to go.” If I were to travel to a distance of 5 kms, an auto rickshaw might be the best option, while for a journey from New Delhi to Kochi, a flight might be the best. A flight would not be available for a short distance and an auto rickshaw would be highly uncomfortable and slow for a long-distance journey.
In Mutual Funds too, the starting point must be- What are your requirements?
It begins with your financial goals and risk appetite.
You’ve got to identify your financial goals first. Some Mutual Fund schemes are suitable for short term requirements or goals, whereas some might be better for long term goals.
Next comes your risk appetite. Different people would have different risk appetite. Even husband and wife may have joint finances but different risk profiles. Some are comfortable with high risk products, whereas some are just not.
So all you need to do is to help us assess your risk appetiteand we help you plan your Financial Goals for life. As simple as a click of a button.Click here to start Investing!
VR Creators Mutual Fund Offerings
VR Creators is empanelled with all the top mutual fund distribution companies in India. Hence our unbiased advice enjoys the choice of the best performing funds across all AMC’s depending on the customer’s requirements and risk appetite. All the funds offered by us are Regular Plans and customers don’t pay any Advisory fees to us. The fund expenses are adjusted against NAV, hence the expense ratio may be around 0.2 to 0.3% higher than a Direct Plan.
Now a 0.3% higher return on direct plans is always better is what you would feel or being told. However, the comparison is not that simple. In a way, the difference is a fee you pay to your doctor, lawyer or CA for their professional advice. Whether you should pay that fee or not depends on the investor’s own capability and the quality of service you get.
What are you getting when you invest in mutual fund through VR Creators?
- Investment recommendations: Performance of mutual funds varies quite a bit and the choice of which fund to invest in is critical. The plan (regular or direct) is a secondary consideration. The choice of a good fund against a poor fund could lead to a difference of as much as 4-5 % in return over time.
- Investment services such as periodic review or rebalancing: By reviewing your portfolio and helping you rebalance, your advisor would further improve the performance of your holdings and get you more return. This could easily be worth another 1-2% over time.
- Additional services like facilitating your investment, tracking your portfolio, and account changes: This is not simply a question of saving time and effort. Most people simply won’t do it and neglect their portfolios resulting in poor returns and, sometimes, even lost money because they don’t have a record of their investments.
So, if you are a diligent investor with deep knowledge, meaning that you can pick and track your own mutual funds then our advice may not provide any extra value. For most people, however, relying on someone’s recommendation is the only option. So, with our hand holding you will get professional advice and service and potentially earn more on your investments against what you could earn on your own or by taking random recommendation. It’s our advice, but your choice that makes your wealth.
