A mutual fund is a form of financial vehicle that invests in securities such as stocks, bonds, money market instruments, and other assets by pooling money from multiple investors. Like other investment vehicles, mutual funds are used to invest money for retirement.
They are considered to be among the most flexible ways to invest for retirement because they can invest in a wide variety of securities, which in turn allows them to respond to current economic conditions.
The concept of mutual funds is very old, almost from the 18th century but what is it? A few days back someone asked me which share I should buy because I can’t take multiple shares.
For example, suppose a P & G share is 13k and you have only 10k to invest. You don’t buy that stock. Similarly, you want shares of the same category as you need to diversify.
Let’s say you want 10-15 shares with a total value of 15 lakhs but you have only 10k if 10 people like you together with if you invest? Everyone pays 10k and builds a portfolio and divides the profit.
When did Mutual Funds Start in India?
Adrian van Katwich dutch businessman had this idea and created his first mutual fund in 1774 after that idea started becoming famous globally but in India, The name was introduced in the 1960s.
Trust of India came under Parliament and completely under RBI no one else could create their own mutual fund. Only after 1987, public banks, LIC, GIC could enter the sector and in 1993, when the focus was on privatization The private sector was allowed to enter.
Mutual Funds But as soon as they entered, we needed a regulatory body that could monitor what they were doing. This regulatory body is SEBI.
It regulates everything related to mutual funds. A regulatory body was introduced, Entered the private sector and somehow grew very well.
Asset management in this way the mutual fund industry continued to grow.
Many investors with similar goals like some investors want to invest in safe funds and others according to their risk profile.
Based on the profile and their target, many such investors pool their money. The money is collected by Asset Management Company (AMC), the fund managers there allocate it to various instruments.
Everyone knows that it is invested in Equity. But it can also be invested in many other instruments: Debt Mutual Funds, Hybrid Mutual Funds Based on your profile you can choose which Mutual Fund suits you.
What are Mutual Funds Investment?
There is a craze for mutual funds in the country today. But many people are still not able to understand that – what exactly is a mutual fund and why it deserves your attention?
Let’s try to dissect the word and see if it gives us meaning.
Mutual – Some fund shared by many parties – a pool of something here we know is money so mutual fund literally means multiple parties pooling their money and sharing it. Makes sense to me.
Let’s say you and your friend. Your wife and your friend’s wife. and their friends and their wives. So we have a lot of people and they have a similar need.
They want to invest their money in stocks and bonds. But none of you guys know how to go about it. You don’t know the process, you don’t know the techniques and most importantly you don’t have the time.
Now a boy. Let’s call it FM. FM boasts of expertise in the investment sector. He knows how and when to invest in stocks, how to choose businesses in which investing will make you money.
FM proposes that you give him your money to invest in shares and he will charge you a small fee for his services.
Whatever return or loss he makes on your money based on his judgment and calculation is distributed back to you. Problem solved. Here FM stands for Fund Manager. The fund manager is the person who takes the most important decisions in a mutual fund.
He is directly managing your money and the money of other fund investors and trying to grow it systematically.
Not all fund managers are the same – some are good at choosing the best stocks to invest in, some are good at choosing the best bonds or debt instruments to invest in, some are good at choosing the arbitrage opportunities in the market.
So, we have a wide variety of fund managers and a variety of fund categories. We will very soon come up with a video about Mutual Fund categories.
Benefits of Mutual Funds Investment
People say that if you are ready to invest in mutual funds for 6-7 years, there is a good chance that your money will be safe and will continue to grow.
Knowledge about the stock market and investing in it is their full-time job. They know the market, they act carefully, and know more analysis than us.
If professionals handle your investment it should be safe enough third benefit-risk diversification.
How many shares can you take for yourself? 10,12,15? And how will you manage them?
When it is combined with a lot of mutual funds the returns are good due to diversification. Some people invest in 3-4 mutual funds which give even more diversification to the portfolio.
The biggest thing is the affordability as we have Took the example of P & G, how much can you buy by yourself. Mutual funds offer you SIP plans for just Rs 500/month. It becomes very affordable if people want to invest in equities then a good way to start mutual funds In fact, you can invest in equity even in debt.
Professionals or some company that is working for you will charge for this also but because so many people invest in mutual funds the cost per person is very less but if you hire a professional then you can imagine that How much amount are you going to pay.
ELSS Mutual Fund is an Equity Linked Savings Scheme. Under Section 80C, you get tax exemption in income tax.
For Savings plans it is not necessary to go for those bad insurance plans where you have to make payments without any good reason.
You can also invest again, mutual funds are highly liquid. You get your returns within 2-3 working days and instead try to sell land, it will take months if you want to invest where you get liquid money.
Also, the Mutual Fund market is a very well-regulated SEBI regulated market with many norms, rules, etc. Only go to SEBI registered distributors for regular schemes otherwise, you can also get direct schemes.
SBI Mutual Funds Review | Everything you need to know- Company, Management Team, Top Funds
SBI Mutual Fund is one of the top 5 Asset Management Companies in India.
It is a joint venture between State Bank of India and Paris-based asset management company Amundi and was established in 1987.
Today it manages assets worth more than Rs. 3 lakh crore. SBI Mutual Fund has many firsts to its name.
It was the first AMC to launch a ‘contra’ fund, which is called SBI Contra Fund. In 2015, the Employees’ Provident Fund of India invested in mutual funds for the first time through SBI Mutual Fund Sensex ETF.
Now let’s look at SBI’s investment team
Navneet Munot as the Chief Investment Officer and overseeing investments of over USD 54 billion.
Mr. Rajeev Radhakrishnan is the Head of Fixed Income. He also manages funds including SBI Magnum Low Duration Fund and SBI Short Term Debt Fund.
Srinivasan is the head of Equity. He also directly manages some of the most renowned funds like SBI Focused Equity Fund and SBI Small Cap Fund SBI Mutual Fund.
Top Funds Managers in Country
To name a few, Ms. Sohini Andani manages one of the largest large-cap funds in India. By AUM – SBI Blue-chip Fund. She has experience of more than 23 years of.
Mr. Anup Upadhyay is the Head of Research at SBI Mutual Fund and he manages another very popular fund – SBI Magnum Multicap Fund.
He also manages SBI Technology Opportunities Fund and SBI Magnum Global Fund.
Top performing funds of SBI Mutual Fund
SBI Blue-chip Fund SBI Blue-chip Fund.
It was launched in 2006 and today its AUM is more than Rs. 22,000 crores.
The fund has given an average annual return of around 11% over the last 10 years and has outperformed both its benchmark and category averages for 5, 7, and 10 year periods. It has been able to cover well the deficits displayed in 2008 and 2011.
SBI Small Cap Fund
SBI Small Cap Fund is one of the most renowned funds of SBI Mutual Fund. Its AUM is more than 2000 crores.
The 5-year annualized return of the fund is 16.4% which is almost 8% higher than the category average return.
The fund has also been good at controlling losses and has outperformed most of its peers during the market corrections of 2011 and 2018.
SBI Magnum MultiCap Fund
This Fund was started in 2005 and today its AUM is more than 8,000 Crores.
It wants to invest in good companies and retain them for a long time. The fund returns have delivered around 12% CAGR since launch and outperformed both its benchmark and category returns in 5, 7, and 10-year returns.
SBI Focused Equity Fund
This Fund was launched in 2004 and is a focused category fund. Its AUM is more than 5500 crores.
It has given an average annual return of around 19% since the beginning with a 5-year return of 12%.
How Mutual Fund Investments Make Money
First let us understand an important and simple terminology: NAV or Net Asset Value.
Simply put, NAV or Net Asset Value is the price of a mutual fund unit.
Suppose you invest ten thousand rupees in mutual fund A, whose net assets are hundred rupees. This means that you have bought 100 units of Mutual Fund A. Now as the prices of the underlying shares rise or fall, the NAV fluctuates. When the prices of the majority of the shares rise, the NAV rises.
When the prices of the majority of the shares go down, the NAV goes down. After one year, let us say that the NAV has become twenty rupees.
So the value of your hundred mutual fund units is now twelve thousand rupees and your investment in mutual fund A has given you a 20% return.
Fun fact – you can also buy fractional units.
Suppose the NAV of Mutual Fund B is two thousand rupees but you have only one thousand rupees to invest, what do you do? Well, you invest those thousand rupees and you buy half the units of mutual fund B.
This is completely acceptable.
Why do mutual funds deserve your attention?
Ever since they started becoming popular in the 90s, mutual funds have been one of the biggest wealth creators. Franklin India Prima Fund was started in December of 1993.
If someone invests one thousand rupees in this fund continuously for the last 25 years, then he would have invested around three lakh rupees in this fund.
The value of your three lakh investment will be seventy-five lakh rupees as of today.
You have come to know about how to invest in mutual funds and are thinking of investing in it, then let me tell you that first of all, you must inquire about where you invest your money and only then invest your money. Do it because even a little mistake can teach you to suffer loss.
Nevertheless, investing in a mutual fund can be a good step if you invest in it thoughtfully, then you too can take advantage.
Now you have come to know everything about Mutual Fund so now share this information with your friends.