How Mutual Funds Work - SEBI New Updates for Investors (2024)

Investing in equity funds may be a good option for those who are willing to take on some level of risk in order to achieve potentially higher returns. Equity mutual funds pool together money from various investors to buy ownership in companies that are publicly traded.

Equity funds do carry higher risk, as they invest in the stock market, which can be volatile and unpredictable. However, this higher risk also comes with the potential for higher returns over the long term. It is important to understand that equity funds are a long-term investment option and investors should have a clear understanding of their risk tolerance and investment goals before investing in these funds.

Equity funds are a type of mutual fund that invests primarily in stocks or equity securities of various companies. Examples of equity funds include large-cap funds, mid-cap funds, small-cap funds, sectoral funds, and index funds. Large-cap funds invest in large and well-established companies, mid-cap funds invest in medium-sized companies, while small-cap funds invest in small and growing companies. Sectoral funds, on the other hand, invest in a specific sector, such as technology, healthcare, or energy. Finally, index funds invest in the same securities that make up a particular market index, such as the Nifty 50 or the BSE Sensex.

To buy mutual funds, choose a fund, open an account with a fund house or a trusted platform like Bajaj Finserv, complete necessary documentation, and invest the desired amount. You can also buy funds directly through the asset management companies.

Purchasing a mutual fund involves selecting a specific fund, completing the required paperwork, and investing money. You can buy directly from the fund house or use financial advisors or trusted online platforms like the Bajaj Finserv Platform to facilitate the process.

When buying a mutual fund online, consider factors like the fund's past performance, expense ratio, investment objective, and risk profile. Ensure the online platform is secure, and understand the terms and conditions, fees, and any additional features before making the purchase.

The growth of your investment over 10 years would depend on the performance of the mutual fund. Typically, mutual funds aim to generate returns higher than traditional savings options, potentially resulting in significant growth over the long term.

By investing 30,000 a month through a Systematic Investment Plan (SIP) over 5 years, you would accumulate wealth through regular contributions. The final value of your investment would depend on factors such as the rate of return and market performance during the investment period. Assuming you get a return of 12% per annum, than the value of your investment after 5 years will be Rs. 24,74,591.

Mutual funds are categorised based on their investment objectives and asset allocation strategies. Common categories include equity funds, debt funds, hybrid funds, and thematic/specialty funds, each catering to different investor preferences and risk profiles.

Investors can invest in mutual funds through various channels, including regular plans offered by brokers and online platforms. Each channel offers different levels of convenience and assistance in managing investments.

In a mutual fund, your money grows through capital appreciation and/or income generated by the underlying investments held within the fund's portfolio. This growth is influenced by factors such as the performance of the securities held, changes in market conditions, and the fund manager's investment decisions.