History in Mutual Funds India began in the year 1963 with the formation of Unit Trust of India (UTI). It was launched by the Government of India with the help of the Reserve Bank of India (RBI). Today we will overview mutual funds for beginners. It is totally long term investment.
The first mutual fund scheme in India was started by UTI in 1964 called the Unit Scheme 1964. The history of mutual funds in India can be broadly classified into several stages. We will line them up as follows.
The Act of Parliament of 1963 constituted the Unit Trust of India (UTI). It was established by the Reserve Bank of India.
It functions under its regulatory and administrative control. UTI enjoyed a complete monopoly in the region as it was the only entity to offer services.
It was subsequently removed from the RBI in the year 1978 and was controlled and taken under administrative control by the Industrial Development Bank of India (IDBI). The Unit Scheme (1964) was the first scheme launched by UTI.
As a result of the expansion of the economy, other public sector players entered the market in the year 1987. SBI Mutual Fund was the first non-UTI mutual fund established in November 1987.
This was followed by LIC Mutual Fund, Canbank Mutual Fund, Indian Bank Mutual Fund, GIC Mutual Fund, Bank of India Mutual Fund, and PNB Mutual Fund.
During the period 1987–1993, the AUM had increased nearly seven times from Rs. 6,700 crores to Rs. 47,004 crores. The private sector in India was allowed in 1993 to enter the mutual fund market.
It has played an important role in the history of mutual funds. This provided investors wider options for investment, resulting in increased competition with existing public sector mutual funds.
Liberalization and control of the Indian economy allowed many foreign fund companies to trade in India.
One of the best types of investments in India is the mutual fund investment. Mutual Funds guarantee about 10% of the return. Even if you select the bad schemes then you might get a 10 % return. Try to make your mutual fund portfolio as big as possible.
In case if you have good technical and fundamental knowledge and you can read the market then you can get about 22 - 23 % of Return.
From Mutual Funds, you can not only invest in shares but also in commodity and real estate. Also if we compare them in the stock market you have to buy the shares in the quantity of 1/2/3 in the equity market.
In the commodity market, you need to go for a Lot of (ten, hundred, thousand). But if you have less money and share prices are too high and you can't buy in the stock market.
But in the case of the mutual fund, you can just invest from 500, 1000 rupees that are called systematic investment plan SIP and you get a fraction of shares in it.
All mutual fund schemes require approval from the Securities and Exchange Board of India SEBI before offering units to investors in India.
The SEBI approves after examining the Scheme Information Document (SID), which clearly explains the investment objectives of the scheme, the type of securities invested, the country and region, and the risk associated with each security.
The good thing in mutual funds is that you can remove or withdraw your money anytime when you want. Also, you have an expert fund advisor who manages all those funds.
"Expense Ratio" is the term known as the fund manager, he gets some amount of percentage 1 or 2 % as salary from our side.
Also, you can select the fixed amount of SIP of some amount so that every month that amount gets deducted from our bank. Also if it gets Bounce many times there is no problem.
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| Types of Investment |
There are total for types of investment in India:-
1) Saving accounts
2) Fixed deposit
3) Gold jewelry
4) Real estate
Those who have good knowledge go for the stock market and do investment in equity. Another investment is a savings account where you get just a 4% return. 6-7% return for fixed deposit, and a good rise in fall at 10% for commodity, gold, and real estate.
The stock market has a good profit but also has a loss. If you don't have better knowledge in it or don't know about fundamental and technical analysis you may lead to a loss. Other ways to investments in India are Govt bonds, Corporate bonds, and Cryptocurrencies.
If our money of mutual fund is either invested in the stock market then the risk is high but if in Government Bonds then the risk is low.
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| Types of Mutual Funds |
There are four types of mutual fund:-
1) Equity mutual funds
2) Debt mutual funds
3) Hybrid
4) Money market funds
Equity has types of Largecap equity funds which include big companies top 50 companies, Medium cap equity fund which includes medium companies, and small-cap equity fund which includes small companies. This are a type of fund.
This includes the types 'diversified equity fund'. In this, all large, medium, and small investment is done.
Other is an equity-linked savings scheme where we can save our tax we can save up to 1.5 Lakh in taxes, here we have high risk as well as high taxes.
Sectors mutual fund which has agriculture and logistics included in it.
The fourth one is the Index fund they don't have a fund advisor. It depends total upon Nifty and Sensex of the stock market. It is totally passively managed.
Debt:-
They are bonds, debenture, certificate of deposit. They have low risk and also Low return Bond means government requests to people for the money when they need and the government then returned at a Fixed time with a good investment.
Liquid Funds:- Alternative to saving account this can easily be converted into cash.
Gilt funds:- Where government invests in bonds.
A fixed maturity plan is an alternative to a fixed deposit.
Hybrid:-
This is a mix of equity and debt fund. In this Balance, saving funds has a 70- 30% ratio, where 70% goes to debt and 30% goes to equity in balanced advantage funds 70% goes to equity and 30% goes to debt.
In Mutual Funds, we will not lose the total money invested that is guaranteed. There are two categories of mutual fund first is Active funds which has the high commission they use their brain to invest in your money in top 50 companies and can't assure returns better, but in passive funds which are also known as an index fund that is Low Commission, better assurance returns fund manager does not interfere and it is also safe.
If any good mutual funds are invested for 40 years with only 1000 rupees then after 40 to 45 years you can get the total amount of 3 crore rupees with a 15% return that is the case study done by the experts.
Money Market Funds:-
It has low-risk low returns also short-term investment is there. The invested major portion is in instruments like Treasury bills, commercial papers, and certificates of deposit.
When AMC Asset Management Company brings a new fund it is called as "New fund offer" and it is strictly at rupees 10. If the company collected 10 lakh rupees from the money of people then 10 lakh is "Assets under management". Rs 10 is called net asset value.
Conclusion:-
This was all basic of mutual funds for beginners in India. Here we learned types of mutual funds, how to invest in Mutual funds, what are the returns we get here, and how to invest in it. Mutual Funds are the most balanced funds. Hope you understand every topic of mutual funds.
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