How Does My Money Actually Grow in Mutual Funds
Before moving on to how to grow money in mutual funds, we have to look into a basic idea about mutual funds in this article. It is seen that many people seem complicated about this, but in simple words, a mutual fund is exactly like a company that pools money from many big investors and invests the money in stocks, bonds and at times in short-term debt. The process of buying a mutual fund and at the same time selling it off is quite easy.
Every person in this country has their own needs and requirements in terms of investment plans. So, to cater to the needs of the people there are 3 major types of Mutual funds:
- Equity or Growth funds
- These invest in predominantly in shares of companies
- Capital appreciation and wealth creation are the main primary objectives
- They tend to generate a higher return and are best for long term investments.
- Some examples can be: “Large-cap” funds invest in companies that are run by large businesses.
- Mid-cap funds invest in mid-sized companies and same for small-cap funds.
- But “multi-cap” funds invest in a mix of large, mid and small-sized companies which works well.
- “Sector” funds are those that invest in companies that are related to a single type of business
- Income or bond or fixed-income funds
- These invest in fixed securities like Govn. Securities or bonds, bank certificates and much more.
- These funds are considered as safer investments that are best for income generation.
- Example- Liquid funds, short term, corporate debt. Etc
- Hybrid funds
These funds invest in both Equities and fixed income, offering the best growth potential and income generation like- Aggressive balanced funds, child plans, monthly income plans etc.
Now, while investing in Mutual Funds, the topmost concern in every investor’s mind is how they will grow their money if they are investing in this. Also with too many options, people get confused about where to invest and how. Once you invest in mutual funds, your money will be handled by a fund manager who is an expert in managing the stock market. There is also a misconception on this that investing in mutual funds means investing in stocks. This is not completely true, apart from stock markets there are a lot of sectors, like debt mutual funds, these are for those who are low-risk takers. One should choose their mutual funds based on their objectives and also there are plenty of options to choose from as well.
What are Multicap Mutual funds?
Multi cap funds are investments that deal with stocks of large, medium and small-cap stocks instead of focusing on just one, and also are less risky compared to others like small or mid-cap.
Top 10 best multicap funds are:
- IIFL Focused Equity Fund
- Kotak standard multi-cap fund
- Axis multicap fund
- Mahindra Bhagat Yojana
- DSP equity fund
- JM Multicap fund
- Kotak focused Equity fund
- ICICI Prudential Retirement Fund
- UTI equity fund
- Motilal Oswal nifty 500 fund
Let’s now discuss how one can grow their money from mutual funds!
The fund manager who is an expert in this field of stock market conducts proper study and analysis on stocks and debts so that they can invest your money wisely. The price of a mutual fund is called NAV or Net Asset Value. When someone invests in any Asset Management Company, Mutual Fund scheme or AMC allows them units according to the Mutual Fund NAV.
For example, if one invests Rs 2,000 in a Mutual Fund, and the NAV is Rs 20 for it. So you will be allotted 100 units by AMC of that Mutual Fund.
The money is getting invested in instrument or stock markets indirectly in which the money is invested by the fund manager. Again for eg, if one invested Rs 2,000 in a Mutual Fund scheme and for it, the AMC has allotted 100 units for NAV of Rs 20. In the next year, the Mutual Fund NAV becomes Rs 22. Thus it means in the past year, one has earned a 10 per cent return investing on the Mutual Fund. This is how you can track your investments and also calculate what returns you are going to get.
Debt Mutual Funds
We have spoken a lot on mutual funds earlier now; let’s see what are the best debt mutual funds that people can rely on. Debt is an investment where the capital is invested primarily in fixed-income investments like Govn. securities, corporate bonds, and much more. These debt funds are also known as fixed-income funds and are low-risk investment vehicles and are comparatively more secure than any other volatile market forces.
In today’s world, there are lots of options to choose from, from where you can easily look into the best debt funds that are good performers and give higher returns. It can be based on long term or short term bonds and much more.
Among all the best debt funds that are rated 5 stars, 10 are as follows:
- Kotak Dynamic Bond Fund
- Edelweiss liquid fund
- IDBI liquid fund
- Axis bank & PSU debt fund
- Kotak corporate bond fund
- DSP overnight fund
- ICICI retirement fund
- SBI Magnum Medium duration fund
- LIC MF Banking & PSU debt fund
- Franklin India Liquid fund
Many times investors shy away from investing in mutual funds thinking of risks maybe because they are linked to the market. But a mutual fund is an excellent investment tool to grow your money in a few days with minimum risks.