How to buy mutual funds in India?
You might have heard the term Mutual Funds (MFs) used in context of investment, but did you know what mutual funds are and how they work? A mutual fund pools the money of a large number of investors and is managed by a regulated asset management company (AMC). The money is usually invested in equity shares, bonds or money market instruments, based on the objective of the scheme.
How do mutual funds work?
The MF scheme's value (Net Asset Value or NAV) is declared every day. The AMC appoints a fund manager who invests the money based on the investment objective of the scheme. The major types of mutual funds are Equity, Debt and Hybrid. As the names suggest, equity funds invest predominantly in equity shares of company; debt funds invest in debt securities such as bonds, commercial paper, etc.; hybrid funds invest in equity and debt based on a pre-determined ratio.
The best way of investing in a mutual fund is through a Systematic Investment Plan (SIP) where you invest a fixed amount periodically (usually monthly) through an auto debit of your bank account.
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