You must have heard advice from others many times: “Brother, you should start investing in mutual funds.” You also hear advertisements on TV.
The advertisement says “Mutual funds are right!” Many of you may not know what a mutual fund is. If you don’t know, then I will definitely tell you. The next little information about mutual funds which is important but people do not know, you are going to get it in this video today. First of all, let me tell you: If you want to earn wealth for a long time, then this video will help you a lot.
From the very basic level of education to whatever financial planning you need, this video will help you a lot.
So this video is very important. First of all, you should watch this video till the end. You should share this video and if you have not yet subscribed to this channel, please do and click on the bell icon to stay updated about upcoming videos. What is Mutual Fund? We first learned about fundamental analysis, where we talked about how you can sort out stocks for yourself: which stocks are right for investing and which stocks are not good for investing? After that, we also discussed that, if you want, you can do SIP (Systematic Investment Planning) within your stocks as well. You can invest in the same stock on the same date every month. In mutual funds, your money is diversified in different ways. Debt mutual funds are one example of this. You must have heard about equity mutual funds. You must have heard about the third way: hybrid mutual funds. So what are these things? What is debt, equity or hybrid debt? First, let me explain to you what equity is. Once I told you that you are doing a SIP within one stock, however, in another way, I may want to do my SIP in multiple stocks; it can be my SIP or my lump sum. I can say I want to invest in stocks, and if you want to invest in multiple stocks, you can also invest in equity mutual funds. Now, equity mutual funds also have many components. You must be hearing these terms often. Even if you have not heard, let me explain everything to everyone. There are large-cap funds.
There are midcap funds.
There are small-cap funds.
One is your multi-cap fund. One is your flexi cap fund. You guys get very confused.
But let me explain everything to you in very simple language. What are debt and hybrid funds?
Now let’s see: What are large-cap funds? Cap means market cap.
Whenever you invest in a stock, you look at its market cap. I told you, for example, there are two indices in India NSE and BSE.
The top 50 companies of NSE make Nifty. On what basis are the top 50 companies in Nifty top 50. These are the companies that have the highest market cap. Large-cap companies are the top hundred companies in India by market cap; everyone will say that we should invest in large-cap funds. Now what is a mutual fund?
By now you must have understood that investments are happening in many places, but in what way are investments happening everywhere?
You are not giving money directly to anyone. Now what do you do? There used to be a company here which we used to call AMC.
The asset management company has started a fund called a mutual fund.
Now this fund has a manager who is well-educated, who has a lot of experience and a good track record, and also a good team. Now first of all you need to understand this company.
You will earn more later. First of all you have to understand this. How does this AMC earn money? You can talk about big companies.
You talk about SBI. You talk about Kotak. You talk about ICICI. You talk about quantity.
There are many companies in the market running different mutual funds.
Now the AMC earns when someone invests money in its fund.
Now, if you also invest money in a mutual fund, why would you do that? That is the issue, and when you invest, what will be the AMC of this fund?
This AMC charges fees ranging from 0% to 2%. What does that mean?
If you give 1 lakh to the AMC and he deducts 2%, the investment will be ₹98,000. These 2,000 rupees go to the AMC.
Now you are not the only one who is investing money in the AMC. Imagine: we have 10,000 such people with the AMC.
You can understand their earnings as 10000 * 2000 because they have to pay salaries to the fund managers as well. What is their main objective? They will give you the returns that they promise, but the main purpose is to take fees from you.
Now you will see that 2 percent is too much in most cases. The fees are running around one percent, sometimes even less than one percent. It may be okay.
Moreover, we are going to talk about it and analyze it. But it was important for you to understand that when you invest in a mutual fund, you give money to the AMC, who gives it back to you. Then your money is invested in the mutual fund, which is handled by the mutual fund managers because they are experienced people. Now when we talk about India, we know that there is SEBI and AMFI, and they make sure that your money is not wasted and nobody cheats you.