post 15
Dated16/5/2020
Mutual Funds
snippet Mutual Funds have a lot to offer read more to find out

Mutual funds are probably the best option for mediocre investments and they are affordable and easy to learn. Mutual funds as said earlier are like a ice cream studio with a lot of flavours. These flavours offer us to invest in a variety of debt and equity type funds
But wait no one might have told you that you can also use mutual funds like a savings Bank Account. Banks give us around 3.5 percent after saving their spread on a regular savings account but a Liquid Debt fund can give you about 6-7% with an insta withdraw facility where we can withdraw the money in half an hour of order placement.
Hence we can use mutual funds like a Bank account with selective funds like Liquid funds that invest out money in instruments of money market like treasury bills and short term G-Secs.

Mutual Funds are also an alertnative of FD, yes a low duration debt or guilt fund is normally risk free and gives returns ranging from 8-11% whereas the Bank FDR barely crosses 6% in rare cases.
there’s still more in the Ice cream studio, You can get a SIP(systematic Investment Plan) registered with a mutual fund of your choice and can get a nice investment portfolio. See a SIP is not a mutual fund but an investment strategy.In a SIP we promise to pay a agreed amount each month to generate a saving corpus for a goal like- Child’s education or getting a house or a car. But the goal should be SMART. The sip works on the principal of average pricing and is shown by the following example:-

One day Bunty bought 4 pencils worth $10 rach and he expected the price to rise to 11 in subsequent days. Ladoo on other hand just brought a single pencil and waited for next day, next day the price rose to 11, Bunty was happy to see profits,Ladoo patiently bought another pemcil for $11. the next day price fell to rs 8 and laddu again bought a pencil, Bunty at this time started to worry for his investment, the next day price went to $9 and Ladoo got another pencil.
now if we analyse the position of Bunty, He has invested 40 rupees for 4 pencils that today value around 36, Whereas Laduu has bought 4 pencils for 38 and the today’s value is of 36. so who stands in a better position.
this can now be seen as a case between mutual funds where one investor does a huge impulsive lumpsum transaction whereas the wiser is patient and investes periodically, Clearly now when the price of pencil will reach $10 the initial value laddoo would be in profit whereas bunty would be at a neutral position.

But I’ve heared that money gets locked in mutual funds??
Well there are several types of funds that define their own terms of operation that should be read and anayzed before investing, like

  1. open/Close ended funds: some funds are close ended hence they allow entry for a short period of time, exmaple a fund gets opened for a window of a week then it would be available for purchase on only those days, whereas in a open ended fund there is anytime entry.
  2. Exit Load : This thing is a must to check before investing in a fund. The exit load is a percent of penalty that would be levied on a your investment or a part of your investment if you withdraw before a particular tenure, this can be between 15 days to several years.
  3. Lockin Period: If there is a lockin period termed in a fund then that would lock your amount and you can not wihdraw before the lockin, Sometimes there is a partial lockin like you cannot withdraw more than 40% of amount before a period.

So mutual funds sahi to hai but
Read all scheme related documents carefully

Happy investing and stay safe.