Mutual fund investment is a style of investment where several investors amalgamate their resources together in order to purchase stocks, bonds and other securities.
These collective funds (referred to as Assets under Management or AUM) are then invested by an expert fund manager appointed by a mutual fund company (called Asset Management Company or AMC).
The combined underlying holding of the fund is known as the ‘portfolio’, and each investor owns a portion of this portfolio in the form of units.
History of Mutual funds
The Indian mutual fund industry started in 1963 with the formation of the Unit Trust of India (UTI) as an initiative of the Government of India and the Reserve Bank of India. Later, in 1987, SBI Mutual Fund became the first non-UTI mutual fund in India.
How to Invest in A Mutual Fund
To start investment in mutual funds, you must be KYC-compliant. It is a one-time process and documents that are required are one self-attested photocopy of address proof and PAN card and one photo. There are several kinds of mutual fund options available in the market.
If you are a beginner, start your investments in balanced funds and tax planning funds.
Benefits of investing in mutual funds
After investing your money in a mutual fund, you can earn returns in two forms:
- In the form of dividends declared by the scheme.
- Through capital appreciation – meaning an increase in the value of your investments.