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Investing in Mutual Funds: A Safe Haven for Young Investors

“Mutual Fund SIP accounts stood at 6.81 crores! And the total amount collected through SIP during July 2023 was ₹15,245 crore.” (Source: AMFI)

We know! We know! Starting with a statistical statement? So not cool!

But – isn’t this data absolutely riveting? (Nerds, unite!)

In just the last month, over ₹15,000 crores were invested in mutual funds using SIP. This means that the total amount invested in mutual funds was even more!

You don’t need to Google it! We did it for you. 

Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the month of July 2023 stood at ₹46,27,687 crores.” (Source: AMFI

This staggering data brings us to the question of the hour – why are mutual funds such a coveted investment option in India today?

Let’s explore what mutual fund investments in India are, and why they are such a popular investment choice amongst investors in the country today – so that we can better understand why it might just be the right place to start for young investors!

We’ll start with the fundamentals, and work our way up!

What is a mutual fund investment?

A mutual fund investment is a pooled investment instrument that collects money from multiple investors. This money is then used as capital to invest across stocks, bonds, securities, or other money market instruments. Every investor of a mutual fund holds mutual fund units pro rata, as per their investment amount.

So, if you invest ₹1,000 when the cost of each mutual fund unit is ₹50 – you are effectively buying 20 units of the fund for that amount.

You can invest in an array of mutual fund investment plans using a mutual fund investment app, can make mutual fund investments online, or opt to go through a fund manager and invest your money through a traditional channel.

What makes mutual funds investments a good option for young investors?

You will often hear people say that mutual fund investments are a ‘safe’ investment option. We’d like to point out that while no investment is risk-free, and hence cannot decidedly be 100% safe, there are certain parameters that make mutual funds a safer investment option for young investors, compared to some other options out there. 

Let’s take a look at why this is the case – 

1. Diversification – Mutual fund investments spread the investors’ capital across a range of assets, which in turn helps reduce the risk associated with investing in individual securities. Diversification can be a big helper to mitigate the impact of poor performance of any one security on the overall fund. You have the power to tackle risk head-on!

2. Liquidity – Most mutual fund investments offer investors liquidity, i.e., investors can buy or sell their shares on any business day. The fund’s Net Asset Value (NAV) is calculated at the end of each trading day, and investors can transact at that NAV. Keep in mind that some mutual funds do have lock-in periods associated with them, in which case transactional charges and exit loads may apply. You have the power to choose if you want to withdraw your investment or stay invested for longer!

3. Flexibility – How much money do you want to invest? No amount is too small! You can opt to invest in mutual funds using Systematic Investment Plans (SIPs), which allow you to invest as little as ₹100. You can also use apps like Deciml that let you invest as little as ₹1 into mutual funds! Mutual fund investments eliminate the need to create large sums of capital, allowing you to invest however much you want, whenever you choose to. You have the power to allocate your monetary resources according to your financial goals.

4. Security – Mutual funds are regulated by regulatory authorities. In India, for example, mutual funds are regulated by the Securities and Exchange Board of India (SEBI), which sets guidelines to ensure transparency, investor protection, and fair practices. Further, all mutual fund investment traders are regulated by the Association of Mutual Funds in India (AMFI). You have the power to enjoy a safe and secure trading environment.

5. Management – Opting for mutual fund investments means you can leverage professional fund management services. All the best mutual fund investments in India can be traded through professional fund houses. Experienced and knowledgeable fund managers can guide you toward making prudent investment decisions. Their experience is a valuable part of mutual fund investing. They analyze market trends, economic conditions, and other factors to determine the optimal allocation of the fund’s assets. You have the power to access this expertise to inform your financial decisions.

These five elements of mutual fund investments are the facilitators that make mutual funds a reliable investment option for young investors. As you move along your investment journey, you will find that having the ability to be flexible with your investments while also being able to diversify is just – *Chef’s Kiss*!

The Magic of Gold – Unlocking the Potential of Investing in Gold Mutual Funds

Straight off the bat – we’ll tell you – there are a lot of mutual funds for investment in India. You can choose funds across asset classes, based on your goals, and your risk capacity. But, we wanted to touch upon two very interesting mutual fund investment options that are gaining momentum in the Indian market, especially among younger generations – both are types of mutual fund investments but in gold! Today, since everything is digital – so is gold! And you can invest in it through mutual funds. Here are two key ways you can do so – 

1. Digital Gold – Simply put – digital gold is just gold, but you don’t physically hold any gold! The prices of real gold will reflect on digital gold as well, and you will make investments based on the current value of the digital currency. Think of it as all the value of the gold metal but through a digital trading ecosystem.

2. Sovereign Gold Bonds (SGBs) – These are securities that are issued by the Reserve Bank of India (RBI) on behalf of the Indian government. It is the Center’s alternative for investors, instead of holding real gold. Just like physical gold, you can invest in SGBs based on a per-gram price.

Historically,  gold has proved to be a stable, secure, and appreciating form of investment, and as such, it is a good area in which to diversify. 

Mutual fund investments themselves have been a promising investment option for youngsters in India – because of the five ways in which they empower the investor. But we’ll leave you with the fodder to ponder on digital gold as an option to explore if you’re looking to diversify your financial portfolio.

FAQs

  • What is a mutual fund?

A mutual fund investment is a pooled investment instrument that collects money from multiple investors. This money is then used as capital to invest across stocks, bonds, securities, or other money market instruments. 

  • Are mutual fund investments safe?

Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI). Further, all mutual fund investment traders are regulated by the Association of Mutual Funds in India (AMFI). 

  • What is a mutual fund investment calculator?

A mutual fund investment calculator is a tool that will allow you to calculate your ROI when investing through a SIP option. You can find one such calculator here.

  • What is a Sovereign Gold Bond?

These are securities that are issued by the Reserve Bank of India (RBI) on behalf of the Indian government. It is the Center’s alternative for investors, instead of holding real gold.

  • How much money do I need to invest in mutual funds in India?

You can invest as little as ₹100 in mutual funds using a Systematic Investment Plan (SIP). You can also invest as little as ₹1 through micro investment apps like Deciml.

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