Author: Ashish

There are so many articles out there with a headline resembling the heading of this article. Even I tried initially to write an article that could work as a comprehensive guide for a beginner. But I realized that there so many things I wanted to cover that a single article would not suffice. Thus I…

Debt funds invest in fixed income instruments, popularly referred to as bonds. Bonds have fixed maturity and most of them pay a fixed interest rate. They can be issued by the government, by PSUs or by private corporations. Debt funds hold some bonds until maturity and receive principle + interest and trade others in the market. The risk associated with a debt fund depends on the credit risk (risk of bond issuing authority unable to pay back interest and/or principle amount) and interest rate risk (fluctuation in the market price of the bond in response to the fluctuation in interest rate)……….

I have already written an article about which mutual fund category to choose, I would recommend you to stick to those categories. But, the question of how to select a fund from a category still remains, so let’s address it……

You should first determine whether you want a mutual fund for equity or debt portfolio. For equity portfolio, you can select a fund belonging to one of these categories, Aggressive Hybrid Funds, Large Cap Funds, or NIFTY/SENSEX Index Funds. If you want to take more risk for more returns you can add a fund from these categories, NIFTY NEXT 50 Index Funds or Large & Mid Cap Funds. For debt portfolio, you can choose a Liquid Fund and if you have a long-term goal and are ready to take more risk for more return you can choose a Money Market Fund……

The most effective way to distinguish mutual funds is on the basis of the assets. Mutual funds are of four major categories based on the asset class. Equity funds, funds that invest mainly in the stock market. Debt funds, funds that invest mainly in money market products. Hybrid funds, the funds that invest both in the stock market and the money market. Funds of funds, mutual funds that invest in other funds come under this category. These categories have multiple sub-categories under them, which will be explained in details in this article……..

The dividends paid are not an extra benefit. In reality, dividend results in less appreciation of Net Asset Value (NAV). The dividend option was also marketed as being a tax-free income. But you might end up paying more taxes. The dividend option being a source of regular income is also a myth. The fund house is not bound to distribute dividends. In cases when fund’s earnings are negative or below a certain level, there might be zero dividends distributed.

SIP stands for Systematic Investment Plan, it is an automated method of investing in mutual funds. You select a mutual fund, an amount and a date. On your selected date, the predecided amount is deducted from your account and equivalent units of the selected mutual fund are allocated to you. All this happens without any manual intervention……….