AMFI-Registered Mutual Fund Distributor

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We aspire to mange our money in a better manner as the ultrarich often do through their family offices. However, we would have the limitation in terms of our ability to afford an expensive professional to manage our funds. The solution is Mutual Funds, here many investors pool sums of money they can afford to put aside to earn returns over a period. As many individuals pool money the corpus together becomes huge and is sufficient to afford the cost of an investment professional also known as a fund manager or portfolio manager. This professional invests the corpus in different securities such as bonds, stocks, gold and other assets based on the mandate provided to the mutual fund scheme. The objective being to provide investment returns. While the expenses of the mutual fund (establishment) are shared by all the investors the gains or losses on the investments too are collectively shared. Making mutual funds are a good tool to have professionals manage your investments at a relatively low cost.

Benefits Of Investing In Mutual Funds :

  • Professional expertise
    Investing in financial markets requires a certain amount of knowledge along with skills. You need to research the market, analyse the options available. You need to understand the macro economy, sectors, company financials from an asset class perspective. All this requires significant amount of time and commitment. If you don’t have the skill or the time or both to delve into the market, investing in mutual funds can be an excellent alternative. Since, a professional fund manager takes care of your investments and strives hard to provide reasonable returns. The professional’s fees are charged as a percentage of the funds managed. Usually the volume of funds managed are in crores of rupees and the amount charged for management of the mutual fund are reasonable as compared to the expenses you would incur should you have invested directly in the financial markets.

  • Returns
    One of the best mutual fund benefits is that you have the opportunity to earn potentially higher returns than traditional investment options offering assured returns. This is because the returns on mutual funds are linked to the market’s performance. So, if the market is on a bull run and it does exceedingly well, the impact would be reflected in the value of your fund. However, a poor performance in the market could negatively impact your investments. Unlike traditional investments ,mutual funds do not assure capital protection. So do your research and invest in funds that can help you meet your financial goals at the right time in life.

    Another point to note here would be not all mutual funds invest in the stock market and there are funds that invest in the debt markets, government bonds, gold etc. You may seek the advice of a mutual fund distributor to help you navigate through the volatility mutual funds bring along.

  • Diversification
    The volatility mentioned earlier brings us to the next benefit of diversification.

    When you invest in the market based on your limited resources the number of stocks purchased will be limited, moreover the stocks purchased may be of just a few companies. By its nature varying amounts of money are pooled by several investors in mutual funds, and funds available to the fund manager are much larger than what an individual could contribute. But when you invest in mutual funds, you achieve diversification instantly. For instance, if you invest in a mutual fund that tracks the BSE Sensex, you would get access to as many as 30 stocks across sectors in a single fund. This could reduce your risk to a large extent.

  • Tax benefits
    Mutual fund investors can claim a tax deduction of up to Rs. 1.5 lakh by investing in Equity Linked Savings Schemes (ELSS). This tax benefit is eligible under Section 80C of the Income Tax Act. ELSS funds come with a lock-in period of 3 years. Hence, if you invest in ELSS funds, you can only withdraw your money after the lock-in period ends.

    Another tax benefit is indexation benefit available on debt funds. In case of traditional products, all interest earned is subject to tax. However, in case of debt mutual funds, only the returns earned over and above the inflation rate (embedded in cost inflation index {CII}) are subject to tax. This could also help investors earn higher post tax returns.

  • Overseas investments
    While you have been sensitized to how much time and efforts it would take had you to invest in the markets directly. Now imagine if you wished to invest in global markets, how much more complex matters would get.

    Again, mutual funds have a convenient solution. There are specific funds that have a mandate to invest in select countries, types of sectors overseas, emerging economies etc. Based on your risk appetite and need for diversification you can consider are part of your portfolio to have overseas investments.
  • Types Of Mutual Funds :

    Debt Funds

    Debt funds (also known as fixed income funds) invest in assets like government securities and corporate bonds. These funds aim to offer reasonable returns to the investor and are considered relatively less risky. These funds are ideal if you aim for a steady income and are averse to risk.

    Equity Funds

    Equity funds invest your money in stocks. Capital appreciation is an important objective for these funds. But since the returns on equity funds are linked to market movements of stocks, these funds have a higher degree of risk. They are a good choice if you want to invest for long term goals such as retirement planning or buying a house as the level of risk comes down over time.

    Hybrid Funds

    Hybrid funds invest in a mix of both equity and fixed income securities. Based on the allocation between equity and debt (asset allocation), hybrid funds are further classified into various sub-categories.

    Funds based on structure :

    • Open-ended mutual funds
      Open-ended funds are mutual funds where an investor can invest on any business day. These funds are bought and sold at their Net Asset Value (NAV). Open-ended funds are highly liquid because you can redeem your units from the fund on any business day at your convenience.

    • Closed-ended mutual funds
      Close-ended funds come with a pre-defined maturity period. Investors can invest in the fund only when it is launched and can withdraw their money from the fund only at the time of maturity. These funds are listed just like shares in the stock market. However, they are not very liquid because trading volumes are very less.

    Funds based on investment objective :

    • Growth funds
      The main objective of growth funds is capital appreciation. Equity growth funds put a significant portion of the money in stocks. Similarly, debt growth funds put a significant portion of the money in debt instruments. Growth funds plow back the gain and allow the corpus to grow rather than pull out the gain or profits.

    • Income funds
      As the name suggests, income funds try to provide investors with a stable income. These are debt funds that invest mostly in bonds, government securities and certificate of deposits, etc. They are suitable for different -term goals and for investors with a lower-risk appetite.

    • Liquid funds
      Liquid funds put money in short-term money market instruments like treasury bills, Certificate of Deposits (CDs), term deposits, commercial papers and so on. Liquid funds help to park your surplus money for a few days to a few months or create an emergency fund.

    • Tax saving funds
      Tax saving funds offer you tax benefits under Section 80C of the Income Tax Act. When you invest in these funds, you can claim deductions up to Rs 1.5 lakh each year. Equity Linked Saving Scheme (ELSS) are an example of tax saving funds.

    SIP’s In Mutual Funds :

    One of the best features about investing in mutual funds is that you don’t need a large amount of money to start investing. Most fund houses in the country allow investors to begin investing with as little as Rs. 500 / 1000 per month through Systematic Investment Plans (SIPs). Now, this might seem like a tiny amount to begin your investment journey, but when you invest consistently over a considerable period, you can achieve a substantial sum. SIP is a method of investing in mutual funds where you invest a specific amount at fixed intervals. This way, you can avoid timing the market and increase your wealth steadily.

    Here’s an example to illustrate how you can unleash the power of SIP’s:

    Let’s imagine you invest Rs. 5,000 per month in an equity fund for 15 years. The fund offers an annual return of 12%. At the end of the investment period, you would have amassed a corpus of over Rs. 23.79 lakh. Now, if you continue investing the same amount for another fifteen years (total 30 years), you would get a total sum of almost Rs.1.54 crore! This is roughly six and half times the amount in an additional fifteen years.

    This is the power of compounding. The returns you earn in turn begin to make profits for you. So, when you invest for a longer time frame, your gains also rise higher. But to gain the maximum benefit of compounding, you should start investing as early as possible and invest for as long as possible. This can give you an extended investment window to increase your returns.

    Note: SIP should not be construed as a promise on minimum returns and/or safeguard of capital. SIP does not assure any protection against losses in declining market conditions.

    How To Invest In Mutual Funds :

    Here are the steps you can follow to begin your investment journey :
    • Fill in your enquiry on
    • Complete your KYC formalities (if you have not yet done so)
    • Enter the necessary details as required on
    • Our experts shall get in touch with you and understand your requirements
    • Based on the discussion and options you can proceed to choose your mutual funds
    • Set up instructions for lump-sum or SIP investments

    Final thoughts :

    Investing in mutual funds is one of the simplest ways to achieve your financial goals on time. But before you invest, take an adequate amount of time to go through the different fund options. Don’t invest in a fund because your colleague or friend has invested in it. Identify your goals and invest accordingly. If required, you can approach a mutual fund distributor / financial advisor to help you make the right investment decisions and plan your financial journey.

    Exchange Traded Funds (ETF’s) :

    Exchange-traded funds, commonly known as ETFs, are a collection of various securities such as bonds, shares, money market instruments, etc., that often track an underlying asset. Simply put, ETFs are a mashup of different investment avenues. They offer the best attributes of two popular financial assets – mutual funds and stocks.

    ETF funds are somewhat similar to mutual funds in terms of their structure, regulation, and management. Additionally, just like mutual funds, they are a pooled investment vehicle that offers diversified investment into various asset classes like stocks, commodities, bonds, currencies, options, or a blend of these. Moreover, they can even be traded like stocks on the stock exchanges.