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

warikoo

27 Apr 202117:49

Summary

TLDRThe 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.

Outlines

00:00

😀 Introduction to Mutual Funds

The speaker introduces the topic of mutual funds, emphasizing the importance of understanding what they are, how to select them, and the process of buying them. The video aims to educate viewers on mutual funds, covering five main points: the concept of mutual funds, types of mutual funds, an important element to consider (tax implications), how to select a fund, and how to start investing. The speaker also discusses various types of funds, such as world funds and sector-specific funds, and the benefits of expert management in mutual funds. The focus is on helping viewers begin their investment journey through mutual funds.

05:01

📈 Understanding Mutual Fund Investments

This paragraph delves into the dynamics of mutual fund investments, explaining how the net asset value (NAV) can fluctuate based on market conditions. It discusses the tax implications of investing in mutual funds, distinguishing between short-term and long-term capital gains tax. The speaker advises on the importance of historical performance as an indicator of a fund's potential future performance, while also cautioning that past performance is not a guarantee. The paragraph also touches on the expenses involved in managing a mutual fund and the impact of these costs on returns. It concludes with a discussion on the two main ways to invest in mutual funds: through systematic investment plans (SIPs) or lump sum investments.

10:04

💼 Strategies for Mutual Fund Investment

The speaker shares strategies for investing in mutual funds, highlighting the importance of considering the historical performance of a fund over different periods. They discuss the role of expense ratios and how lower ratios can lead to higher returns for investors. The paragraph also covers the concept of index funds, which aim to track the performance of a specific index, and the potential benefits of investing in such funds. The speaker provides a detailed walkthrough of how to evaluate and select mutual funds, including looking at the fund's performance, the management team, and the underlying assets. They also mention the use of technology and apps to track and manage investments, emphasizing the convenience and efficiency of digital platforms.

15:08

🌐 Diversification and Risk Management in Mutual Funds

In this paragraph, the speaker talks about the importance of diversification in mutual fund investments, explaining how it can help manage risk and potentially increase returns. They discuss various sectors and market segments that mutual funds can invest in, such as technology, energy, and index funds. The speaker also addresses the concept of risk and return, suggesting that higher risk can lead to higher rewards but also comes with the potential for loss. They provide examples of how to allocate funds across different types of mutual funds to balance risk and reward. The paragraph concludes with advice on how to start investing in mutual funds, including the use of apps and online platforms, and the importance of staying informed about market trends and fund performance.

Mindmap

Keywords

💡Mutual Funds

Mutual Funds are investment vehicles that pool money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities. In the video, mutual funds are the central theme, discussed in terms of their types, benefits, and how they can be used for investment purposes. The script mentions various types of mutual funds and their potential for returns, emphasizing their role in an investor's portfolio.

💡Equity Linked Saving Scheme (ELSS)

ELSS is a type of mutual fund in India that is tax-efficient and has a lock-in period of three years. It is related to the video's theme by highlighting the tax benefits and investment horizon. The script uses ELSS as an example of a mutual fund that offers tax savings and has certain restrictions on withdrawal to encourage long-term investment.

💡Risk

Risk, in the context of the video, refers to the potential for loss or variability of returns in an investment. The script discusses risk in relation to different types of mutual funds, such as equity funds being riskier than debt funds. It also touches on risk tolerance, which is a key factor in selecting the right mutual fund for an investor.

💡Hybrid Funds

Hybrid Funds are a type of mutual fund that invests in both equity and fixed-income securities, aiming to balance risk and return. The script mentions hybrid funds as an option for investors who do not want to take on too much risk but still seek growth potential, illustrating the diversification aspect of mutual funds.

💡Index Funds

Index Funds are mutual funds designed to replicate the performance of a specific market index, such as the S&P 500. The script discusses index funds as a way to invest in a broad market segment passively, highlighting their lower expense ratios and how they can be used for long-term investment strategies.

💡Tax Implications

Tax Implications refer to the tax consequences of investing in mutual funds, such as long-term and short-term capital gains tax. The video script explains how different holding periods can affect the tax rate on mutual fund investments, which is crucial for investors to understand when planning their financial strategies.

💡NAV (Net Asset Value)

NAV is the value of a single unit of a mutual fund, calculated by dividing the total value of the fund's assets minus its liabilities by the number of outstanding units. The script mentions NAV in the context of understanding the value of mutual fund investments and how it can fluctuate based on market conditions.

💡Expense Ratio

Expense Ratio is the annual fee that mutual funds charge their investors to cover the fund's operating expenses. The script discusses the importance of a low expense ratio for mutual funds, as it directly impacts the investor's returns by reducing the overall cost of investing.

💡Subscription

Subscription in the video refers to the act of investing in a mutual fund by buying units of the fund. The script uses the term to explain the process of starting an investment in mutual funds and the considerations involved, such as the amount to invest and the type of mutual fund to choose.

💡Diversification

Diversification is the process of spreading investments across various financial instruments to reduce risk. The video script emphasizes the importance of diversification in mutual funds, explaining how it can help mitigate risk by investing in a mix of different asset classes.

💡Investment Horizon

Investment Horizon is the length of time an investor plans to hold an investment before selling it. The script discusses investment horizon in relation to mutual funds, particularly ELSS, which has a mandatory lock-in period, and how it can influence an investor's choice of mutual fund based on their financial goals and time frame.

Highlights

Introduction to mutual funds and how to start investing in them.

Explaining the two ways to purchase mutual funds: direct and through systematic investment plans (SIPs).

Discussing the importance of understanding the types of mutual funds available.

Highlighting the significance of tax implications when investing in mutual funds.

Guidance on how to select a mutual fund based on various factors.

Explaining the concept of net asset value (NAV) and its role in mutual fund investments.

Discussing the benefits of investing in tax-saving funds and their limitations.

Advantages of investing in index funds and how they track market indices.

The impact of market conditions on the net asset value of mutual funds.

Details on long-term and short-term capital gains tax on mutual funds.

How to track and manage mutual fund investments using various apps and platforms.

Strategies for investing in mutual funds for different financial goals and risk appetites.

The role of expense ratios in mutual fund performance and how to minimize costs.

Comparing the historical performance of mutual funds to make informed investment decisions.

Tips for investing in mutual funds through systematic investment plans (SIPs).

Explaining the process of investing in mutual funds through online platforms and the benefits of direct investing.

The importance of understanding the risks associated with different types of mutual funds.

How to start investing in mutual funds with a small amount and the potential for growth.

Advice on investing in mutual funds for long-term financial planning and wealth creation.