Investing in the stock market is risky. If you cannot take the risk of investing money directly in the stock market, then mutual funds can be a good option for you. In mutual funds, your money is handled by fund managers. These fund managers invest your money after studying the market, past data, and future trends. They also have a team of researchers to help with this work. So, the risk in mutual fund investment is lower. You can build a large amount of wealth from mutual funds in the long term.
How Many Types of Mutual Funds Are There?
There are mainly three types of mutual funds – equity funds, debt funds, and hybrid funds. Other types are liquid funds, index funds, and ELSS funds.
Equity Funds
These funds invest in the stock market. They are more risky but can give higher returns in the long term. Equity funds are also divided into large-cap, mid-cap, small-cap, and multi-cap funds.
Debt Funds
These funds invest in bonds and other fixed income things. They are less risky than equity funds, but they also give less return. There are three types of debt funds – liquid funds, ultra-short term funds, and short-term funds.
Hybrid Funds
Hybrid funds invest in both equity and debt. These funds try to give good return with less risk. There are many types of hybrid funds like conservative, balanced, and aggressive hybrid funds.
What is SIP?
SIP means Systematic Investment Plan. In SIP, you invest a fixed amount every month in a mutual fund. You can also invest a big amount at one time. Experts say SIP can give about 12% return every year in the long term.
How Can ₹30 Lakh Be Made from a ₹10,000 SIP?
Experts say you should start investing from your first salary. If you invest ₹10,000 every month in a SIP, then in 12 years you can make around ₹30.8 lakh. In this, your total investment will be ₹14.4 lakh and you will earn ₹16.4 lakh as interest.