What is Mutual Funds ?

Whenever you hear about mutual funds in TV commercials, newspapers or from the people next to you, then the question must arise in your mind - "what are mutual funds?", "What are their benefits?", "why and how do people invest money in it?". If yes, then you are in the right place, you must read this post of ours, after reading this you will know everything you need to know about mutual funds. Also in this post, we have listed the Top 10 Mutual Fund Brokers in India. As well as some good mutual fund brokers, read this post till the end. So Let's start with,

What are Mutual Funds ?

To understand this term easily let's take an example, assume you got money from somewhere and you purchased a brand new car but the catch is that you don't know how to drive it, now, you have two options, first, you will take driving lessons, get a driving license and after some experience, you will be ready to drive by yourself and the second option is that you will hire a professional driver for yourself, who also has a license and good driving experience. In my opinion, the second option will be better for you, after hiring a driver you will not have to put in any effort, this driver will do all the hard work for you. Friends, just in the same manner, our mutual fund works, if you are someone who does not have a good understanding of stocks, bonds or money market instruments and don't have time to research and learn all these things, then mutual funds would be a good alternative for you. You should invest in mutual funds. here your money is invested by a well-experienced person known as a fund manager into the assets like stocks, bonds, gold etc. just like our hired car driver.

Mutual Fund broker

So, if you are interested to invest in mutual funds then you must know about mutual fund brokers to start your investment journey, so, what/who is a mutual fund broker?
In simple words, we could say that a mutual fund broker is someone who is certified to sell mutual fund schemes they may be a person or entity. They work as an intermediary in the buying and selling process for which they charge some fee.

Although some brokers claim to charge zero brokerage fees generally many of them are paid. And if you are thinking about which broker will be good for you?

then don't worry here we have listed the Top10 mutual fund brokers in India just for you.

Rank Brokers  No.of Clients
1 Zerodha 5,941,400
2 Upstox 4,878,850
3 Groww 3,324,670
4 Angel One 3,060,400
5 5paisa 1,579,980
6 Paytm Money 3,42,898
7 Alice Blue 150,060
8 Fyers 108,780
9 SAMCO 79,786
10 Master Trust 54,700

**The ranking of brokers is based on the number of active customers at the current date. This ranking may vary according to the time.

Types of Mutual Funds

Mutual funds types are generally based on - the investment motive, structure, and nature of the schemes. 

When classified according to the investment motive, mutual funds can be of 7 types

  • Fixed-income funds or debt funds
  • Equity or growth funds
  • Money market or liquid funds
  • Tax-saving funds
  • Balanced funds
  • Gilt funds
  • ETFs (exchange-traded funds)
Based on structure:
  • Open-ended scheme
  • Close-ended scheme
Based on nature:
  • Equity
  • Debt
  • Balanced

We have explained some of these funds types below. 

Debt funds or Fixed income funds- If you are one of those who looking for risk-free, regular and steady, income, debt funds can be a good choice. Money invested here in fixed income or debt securities such as debentures, corporate bonds, commercial papers, government securities, and various money market instruments, Gilt funds, short-term plans, liquid funds, income funds, and MIPs falls into its subcategories.

Growth or Equity funds- If you have a risk appetite and patience then this fund could be a good option for you These funds invest in equity shares and the objective of the investment is capital gains over the medium or long period, provide you good returns over a long period but they are connected to highly volatile stocks so the risk is also high.
Equity funds can further be classified into index funds. and diversified sector

Tax saving funds- If you are looking to grow your capital while also saving tax, you can opt for tax saving funds schemes. Investors are eligible for tax refunds under section 80C of the 1961 Income Tax Act through tax savings funds, also known as equity-linked savings schemes.

Balanced fund- If you are ready to take moderate risks over the medium or long term then consider these funds as a good option. because they invest in both growth and debt share you could expect regular profit as well as growth at the same time with the help of these funds.

ETFs(Exchange-traded funds)- These funds offer a variety of investments schemes into various asset classes like stocks, bonds, commodities, gold, currencies, or a blend of these. These type of funds offers you the facility of purchasing and selling units on the stock exchange throughout the day.

Open-ended schemes- Under an Open-ended scheme, units are purchased and sold continuously, allowing investors to enter and exit as they see fit. Purchase and sale of funds are done on the Net Asset Value (NAV).

Close-ended schemes- In such types of schemes, the unit capital is fixed and only a specific number of units can be sold. which means before the end of the time you can not exit the scheme, and also you can not buy schemes after the New fund offer (NFO)has passed.

So, these are the types of mutual funds, choose wisely according to your plans.

Conclusion: In this post, we have learned that there are many types of investment schemes available in mutual funds, you can make short term, long term or moderate investments according to your goals. In mutual funds, your money is invested wisely by the experts. So stop worrying and start investing, I hope this post was helpful to you Thanks:)

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