Mutual fund explanation

Could anyone please brief about how mutual fund works

Hey @Pandaribai! Welcome to Niyo Community :slightly_smiling_face:

Mutual funds serve as a good option for people who don’t have the time or the know-how to make their money generate more money (that counts most of us in). The money invested here goes to a pool account which is managed by a team of fund managers in the AMC who have the required qualification and expertise to make investment decisions.

The money you invest in a Mutual fund scheme gets invested in the Mutual Fund company that then further invests it in Debt and Equity instruments primarily allocating it according to the scheme details.

You can read more about Equity and Debt Mutual funds in the links here -

All you wanted to know about Equity Mutual Funds

All you wanted to know about Debt Funds

Investment in any Mutual fund follows these steps -

  1. Investment - You can invest in MF in two ways - SIP or Lumpsum

  2. SIP - Systematic Investment Plan - This refers to investing a certain amount in the chosen fund periodically like daily, weekly, monthly, etc. Here we have only a facility for monthly SIPs.

You can read more about it here -

What is SIP (Systematic Investment Plan)?

Which is better - monthly SIP or weekly SIP?

  1. Lumpsum - This is a one-time investment in which you can invest in your chosen MF scheme as the name suggests for only one time. You can repeat the process later on if you wish.

Lumpsum or SIP - Which is better?

  1. Tracking Profit/Losses - Yes, you read it right. There are equal chances of losses and profits in Mutual fund investments. So, it is always recommended to invest according to your risk capacity, objectives, and time duration for which you plan to invest. These factors vary for each investor and the choice of MF scheme to invest in is highly case-specific. So, one recommendation suitable for a person might not be the same for the other. However, I can provide some resources to help you make investment decisions.

Beginner’s guide to investing

Know your risk profile

You can make use of the above resources in helping you make your own choice in investing. There are many other useful blogs on the website as well which you can make use of.

Once you have completed making your investment, you can track its performance (gain/loss) in your Investment account dashboard itself on a daily basis.

  1. Withdrawing the money back to your bank account - Once your objective of the investment is complete, or you have reached the target amount/gain, or you need money, or just like that (it’s your money after all), you can redeem the money out of the mutual funds back to your bank account.

Please take care that there is a lock-in period in some funds where you can redeem only after the lock-in period is over. One such fund is ELSS or Tax save funds. These give tax benefits under Article 80C however investment in it follows a lock-in cycle of 3 years. Similarly, there are other fund schemes too with a lock-in period. This information you can get in the fund detail section.

  1. Charges and Taxes - We all dislike it, but no one can avoid it. :frowning:

There are certain charges and taxes taken by Mutual fund companies and Govt. during investment and redemption.

You can read more about it here - The costs and taxes associated with investing in Mutual Funds
However, we have kept it completely free from our side. There are simply no charges from our side at any point in time - account opening, maintenance, transaction - everything is completely free. :slight_smile:

You can read more here -

How does Niyo Money charge its investors?
Goalwise is changing to Niyo Money

Investments in Mutual funds are subject to market risk. There are no guaranteed returns. However, experts have seen Mutual funds giving good returns in the long run and are considered by many to be a better alternative to Fixes deposits. So, if you haven’t invested yet, what are you waiting for? :slight_smile:

Have any further queries? Please drop the details of it at investments@goniyo.com and someone from our team will get back to you. :slight_smile:

Regards,

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