Mutual Funds are investment products which enable you and lakhs of investors to collectively invest and grow your money over a period of time.
You can invest a small amount of money every month ( automatically via SIP ) or a one time lump sum in mutual funds
What do you get when you invest your money ?
You get units when you invest in mutual funds.
Let’s say you want to invest Rs 10000 in a mutual fund called Franklin India Bluechip Fund. If the price of the unit on that day is Rs 50, then you will get 200 units.
These units will be stored in your folio ( mutual fund investment account )
Ok, but how does my money grow ?
The mutual will collect monies from other investors like you to create a large investment fund ( also called the mutual fund ) – Then, the professional managers employed by the Mutual Fund Company ( also known as the Asset Management Company or AMC ) will invest your money in stocks / shares of publicly listed companies.
When the value of the stocks shares increase, so does the value of your mutual fund unit.
Let’s say, the unit price of the Franklin India Bluechip fund increased from Rs 50 to Rs 60 in one year.
Now, since you got 200 units at the beginning of the year and are still holding them, the total value of your investment goes up from Rs 10,000 to Rs 12,000 ( 200 x 60 – the new price of the mutual fund unit )
So that’s a very simple explanation of how your money grows.
Hmmm, So when and how much money can I take out ?
You can take out your money anytime you wish
– If you want to take out all your money, sell all your units
– If you want only some of the money ( say Rs 6000 ) then just sell 100 units. The rest of the units will remain in your online account ( Signup here >> ) and the money will continue to grow.
Sounds Good, but how do i decide which mutual fund to invest in ?
There are 1000’s of schemes issued by the 38 mutual fund companies in India across different categories of funds like Equity, Debt, Liquid, Arbitrage, Balanced etc.
Ideally, one should invest in mutual funds for specific goals
– Equity Mutual Funds for long term goals like Retirement Fund, Children’s Education / Marriage etc
– Debt / Liquid mutual funds for short & mid term goals like House Downpayment fund, emergency fund, saving for a car, etc
At StartaSIP.com, we provide a guided service which recommends which mutual funds you should start investing in and get your investments started online via a free investment account.
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