How is the Mutual Fund Scene in India?
Among various sets of investments – mutual funds take the spotlight. While you sit at a coffee shop, sipping your warm cup of coffee, you would most probably hear from the next table a bunch of high school kids talking about how they earned money on the investments in mutual funds. This wasn’t there back in the day – it rarely ever happened. What a change mutual funds have brought. Especially in India – when you can invest as little as Rs. 500. We struggle to invest or save because there is a big load of expenses. When we can invest at our convenience, this aspect changes. Wouldn’t you want to look at the mutual fund market in India? So, let’s get started.
What is a Mutual Fund?
Most times, brand new investors assume mutual funds to stock. They do invest in stocks but are different from investing in individual stocks. It’s quite expensive to invest in an individual stock, not just that – it’s quite risky too. Investing in an individual stock. So what exactly is a Mutual Fund? Let’s understand this slow and steady.
A mutual fund is when a trust, with fund managers and more invest in a stock with pooled investments from different investors.
Let’s just use an example to explain this better.
How Does a Mutual Fund Work?
A new investor chooses the stock market to invest in. He chooses the banking sector and directly buys stock from the Bank of Baroda while the bank is publicly listed. There is another way to do it.
Asset Management companies choose to invest in stocks after thorough research and analysis. He could choose an asset management company that invests in the same company on his behalf. This company will pool in small portions or units as it’s known, from different investors and invest in the stock as a whole. Different sectors have different AMCs, for instance, if you are choosing banking sector, BOB mutual fund can be the one for you.
This means he will be investing in a unit of the stock with several other investors, and this mutual fund will be managed by the AMC or the fund manager to be precise.
Mutual funds don’t make you put all of your eggs in one basket, which makes them less risky and more convenient for the miniature investor.
Also, to make it very clear – mutual funds do not just invest in stocks alone. They invest in different kinds of asset classes that vary in nature. That is why mutual funds have different tenures, risks, and returns.
How to Invest in Mutual Funds?
Well, as already said, mutual funds are an investment pathway mostly for small investors. It is quite easy though, to invest in mutual funds. Just follow the steps mentioned below.
Steps to invest in mutual funds:
Step 1: Firstly, you can find an asset management company that you can rely on. Most importantly, do not forget to check the fund manager who will allocate the stocks.
Step 2: Secondly, you have got to choose your mutual fund from this AMC, and make sure you do all the research that is needed.
Step 3: Now, you can buy a unit or more of the mutual fund.
Step 4: The final step is nothing but monitoring your fund. Investments don’t stop at just buying, but at observing the turns your asset is taking with the evolving market.
How is the market of mutual funds today? Let’s see.
The Current Scenario of Mutual Funds in India
Here are some key factors that are shaping the mutual fund industry today.
- Individual Investors are Increasing
We know that this industry has seen growing participation. But recently, it has also been seeing growing participation from households and banking institutions. The industry is adding more folios, and almost all of the segments were over 15.5% of growth.
- SIP are of Significant Importance Today
SIP funds are being largely driven by retail investors because of the increased financial awareness and digital penetration. Also, since SIPS can be started even at Rs. 500 and more investors are choosing to take it up as a preferred plan.
- Competition is at the Pinnacle
With more and more companies coming into the picture, it’s becoming a highly competitive environment.
The Future of Mutual Funds
Mutual funds are available on a variety of digital platforms. They seem to appeal to both Millennials and Generation Z. Furthermore, the epidemic has increased digital literacy among the general public. This will undoubtedly have an impact on the rise of digital transactions.In India, the Future of Mutual Funds in comparison to millennials and previous generations, Gen Z has an advantage. This, however, goes beyond the concept of technological advancement.
In this regard, Gen Z appears to be in the lead. It is, however, also a matter of embracing new practises. It is far more difficult to assist older generations in adopting digital ways than it is to teach the same to younger generations.
The digital transaction is likely to become the norm as a growing percentage of the client base becomes younger.
Conclusion
If you are thinking about investing in mutual funds, it’s a good thing. You can expand your investment portfolio and also grow financially. But, there is one thing you have got to make sure of. You have got to make sure that you have the risk appetite for it.
| Homepage | Click Hear |
