A mutual fund investment is a kind of investment option where the money from a group of investors is pooled together and invested in different asset classes. Depending on the assets in the portfolio, there are different types of mutual funds, such as equity mutual funds, debt mutual funds, hybrid funds and tax saver funds. With Arch Finance, you can invest a lump sum amount in mutual funds, or you could start an SIP.

Based on the kind of assets and the asset class that they invest in, there are different types of mutual funds in India. Among these, the most common are equity funds, debt funds, hybrid funds and tax saver funds. Equity funds invest predominantly in the equity market, while debt funds have portfolios made up mostly of debt instruments. Hybrid funds contain a balanced mix of both equity and debt, while tax saver funds come with additional tax benefits. Other than these there are other funds like:

1. Money market funds
2.  Index funds
3. Balanced funds
4. Income funds 
5. Fund of funds
6. Specialty funds

Mutual funds pool money from investors who have a similar investment outlook. This money is then invested in different asset classes, depending on what the investment objective of the fund is. Some common asset classes that mutual funds invest in include stocks, bonds, money market instruments, and even gold.

If you’re new to the world of mutual fund investments, you need to first open a demat account to get started with your investments. Arch Finance makes mutual fund investment for beginners simple and easy, with a quick and effortless account opening procedure. After opening your account, you need to create a mutual fund portfolio by shortlisting and selecting the kind of funds you want to invest in.

If you’re unsure about making mutual funds a part of your portfolio, you’ll be glad to note that there are many mutual fund investment benefits to look forward to. You have a range of investment options to choose from, meaning that you can create a portfolio that aligns with your risk profile. Also, you can start investing even with small amounts of money, thanks to SIPs. In addition to this, mutual funds also give you the advantage of market-linked returns and, in some cases, tax benefits.

Based on the risk appetite of the investor, mutual funds can be classified as low risk, medium risk, and high risk. Low risk mutual funds are appropriate for the conservative investor, while medium risk investments are more suitable for the balanced investor. And high risk mutual funds, which also come with the potential for higher returns, are better suited to the aggressive investor.

To save tax by investing in mutual funds, you need to choose special, tax-saving options like ELSS mutual funds. These are tax saving mutual funds that invest in equity instruments and come with a lock-in period of three years. As per section 80C of the Income Tax Act, 1961, the amount invested in ELSS funds is deductible up to Rs.1,50,000.

There is no magic number that can tell you the exact mutual fund returns expected from your investments. However, if you are investing in mutual funds, do keep in mind that these are essentially medium to long term investments. So, over the short term, the returns may be more volatile and unpredictable. But over the long term, mutual funds tend to outperform other investment options, broadly speaking.

Passive funds generally track a market index, and they rebalance the constituents of the portfolio as and when the components of the index change. Active funds, however, are managed by professional fund managers who use their expertise to make hands-on investment decisions about the assets to invest in and the rebalancing that needs to be done from time to time. Due to this, active funds come with higher charges than passive funds.

If you’ve been a conservative investor all your life, you may have had the mutual funds vs fixed deposit dilemma one too many times. While FDs are great for people looking for guaranteed returns, mutual funds give investors the opportunity to create wealth, since they have the potential to offer long-term returns that can beat inflation and FD rates. If you want to get started with mutual fund investments, all you need to do is open a demat account with Arch Finance right away.