How to Invest in Mutual Funds? | Investing Strategy for Beginners in 2021 | Ankur Warikoo Hindi

Summary

The video script discusses mutual funds, explaining what they are, the various types available, and the importance of understanding tax implications when investing. It covers how to select a mutual fund, emphasizing factors like historical performance and expense ratios. The script also touches on different investment strategies, including systematic investment plans and equity-linked savings schemes, and provides insights into index funds, their performance, and how to track and manage investments effectively.

Takeaways

• 😀 Mutual funds are investment vehicles that pool money from multiple investors to invest in stocks, bonds, and other securities.
• 📈 There are various types of mutual funds, including equity funds, hybrid funds, and debt funds, each with different risk and return profiles.
• 💡 It's important to consider tax implications when investing in mutual funds, such as long-term and short-term capital gains tax rates.
• 🏦 The performance of mutual funds is influenced by the management of the fund, including the fund manager's expertise and strategy.
• 🔍 Investors should look at historical performance of funds over different time periods, such as 1 year, 3 years, and 5 years, to gauge consistency.
• 📊 Index funds are a type of mutual fund that aim to replicate the performance of a specific index, offering diversification and lower costs.
• 🌐 The script mentions using apps for tracking investments, highlighting the convenience of modern technology in managing financial portfolios.
• 💰 The minimum investment for some mutual funds can be as low as ₹100, making them accessible to a wide range of investors.
• 🚀 For higher returns, investors may consider equity-linked saving schemes (ELSS) that offer tax benefits and potential for capital appreciation.
• 📝 The script emphasizes the importance of doing thorough research before investing in a mutual fund, including understanding the fund's investment strategy and fees.
• 🌟 Lastly, the script suggests that investors should consider their risk tolerance and investment goals when selecting mutual funds, and not just chase high returns.

Q & A

What are mutual funds and how are they selected?

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets. They are selected based on factors like the fund's objective, historical performance, risk profile, expense ratio, and the fund manager's expertise.

What are the different types of mutual funds mentioned in the script?

The script mentions various types of mutual funds including equity funds, hybrid funds, tax-saving funds (ELSS), and index funds.

Why are tax implications important when investing in mutual funds?

Tax implications are crucial as they can impact the overall returns on investment. Different mutual funds have different tax treatments, and understanding these can help investors make informed decisions to optimize their after-tax returns.

How does the script suggest selecting a mutual fund?

The script suggests selecting a mutual fund by considering factors such as the fund's historical performance, the fund manager's expertise, the fund house's reputation, and the fund's investment strategy and objectives.

What is the significance of the Net Asset Value (NAV) in mutual funds?

The Net Asset Value (NAV) represents the current market value per share of a mutual fund. It is calculated by dividing the total value of the fund's assets minus its liabilities by the number of outstanding shares. Investors use NAV to determine the price at which they can buy or sell units of the fund.

How does the script discuss the concept of Systematic Investment Plan (SIP) in mutual funds?

The script promotes the idea of investing in mutual funds through a Systematic Investment Plan (SIP), which allows investors to invest a fixed amount regularly, thereby averaging out the cost of acquisition over time and reducing the impact of market volatility.

What are the benefits of investing in Equity Linked Saving Schemes (ELSS) as per the script?

The script highlights that ELSS offers tax benefits under section 80C of the Income Tax Act, allowing investors to claim a deduction on their investments up to a certain limit. Additionally, ELSS investments come with a lock-in period of three years, which encourages long-term investment.

How does the script address the risks associated with investing in mutual funds?

The script acknowledges that while mutual funds offer potential for growth, they also come with risks. It suggests that investors should be aware of the risks associated with the type of mutual fund they are investing in and should consider their own risk tolerance before investing.

What is the role of expense ratio in mutual fund investment as discussed in the script?

The script emphasizes the importance of the expense ratio, which is the annual fee charged by the fund management company to cover the fund's operating expenses. A lower expense ratio can lead to higher returns for investors, as it reduces the cost of investing.

How does the script guide investors on tracking their mutual fund investments?

The script suggests using tracking apps or platforms that allow investors to monitor their investments in real-time, providing updates on the value of their holdings and helping them make informed decisions.

What are the tax implications for long-term and short-term capital gains from mutual funds as per the script?

The script explains that long-term capital gains (if the investment is held for more than a year) are taxed at a lower rate compared to short-term capital gains (if the investment is held for a year or less). The exact tax rates depend on the investor's income tax slab.