Personal Finance

What are Mutual Funds? — Paytm Money Explains

October 31, 2019

What are Mutual Funds? — Paytm Money Explains

Like most people, you too must have heard about mutual funds and the possibilities of wealth creation they offer. While we all know that this is undoubtedly a smart mode of investment, very few know what mutual funds really are. And fewer still are the number of people who understand just how convenient it is to invest in mutual funds. Regardless of which category you fall under, Paytm Money will not only simplify this concept for you but ensure you become investment ready as well.

what are mutual funds

What is a mutual fund?

A mutual fund is an investment arrangement where different investors pool their money which is then invested by a professional fund manager. Mutual funds invest in stocks, cash, bonds and/or a combination of these. We refer to these as securities. When these securities are put together in a mutual fund we call it a portfolio. Simply put, a portfolio is a grouping of various securities.

How can I invest in mutual funds?

There are two channels through which you can do your mutual fund investments — a direct plan or a regular plan. In case of a regular plan, you invest through a distributor who charges a commission for his services. In a direct plan, you invest directly with the fund house and save on the commission that you would have to pay to the intermediaries likes a distributor. Investing with Paytm Money gives you the benefit of investing directly and hence, saves any commission or fee you would otherwise have to pay.

How much money do I need to invest in Mutual Funds?

Investing in mutual funds does not require you to have a lot of money. You can start investing with as little as Rs.500 a month. With Paytm Money, you can explore investment options starting from Rs.100 a month and later proceed to increase your contribution as your income increases. Not only this, seasoned investors can now explore the best performing funds on the Paytm Money App and invest directly. We shall discuss this in detail in the later chapters.

Is investing in mutual funds secure?

First-time investors may find mutual funds complex and risky. This is because you may not be aware of how mutual funds work really. You can rest assured that these funds are highly regulated by the government. One of the highest regulatory bodies, the Securities and Exchange Board of India (SEBI) monitors and regulates the mutual fund industry. This means that your money is in capable hands and minds.

Do I need financial expertise to invest?

While having some knowledge about investments and mutual funds is always good, it is not a pre-requisite to investing. Quite simply, the performance of mutual funds depends on the market. Here is where the expertise of fund managers comes in handy. The fund managers make the decisions on your behalf on where to invest your money and when. While they decide on your investments, you also play a crucial role in determining how much returns you will accumulate. In order to generate good returns on your investment, it is recommended that you stay invested for at least three years. But, there are also options for you to invest in funds where you can access your money in case of emergencies.

It will be fair to say that mutual funds have something for every investor no matter what your income or objective in life. If you haven’t invested before, the Paytm Money App could be a good start for you where our financial experts have picked the top-rated funds for you to choose from. You can even find out how you can invest based on your goals. Learn more about goals and investing on the Paytm Money App. If you didn’t have a reason to invest before, you have plenty now. Set new goals and go about achieving them with mutual fund investments.