Select Your Language

The art of re-investing




The word ‘Investment’ is a very old investment was done for future comforts, lifestyle securing the future and capital preservation, income generation and capital generation so on the investing industry is constantly evolving and so many options and alternate options can leave even the seasoned investor baffled and confused; actually investing is an art of appreciating the wealth known, understood and applied habit by a very select few. The word investment means simply means the money committed for the future income is called an investment it could be in fixed income instrument like the bonds, fixed deposits or preference shares and the other is the variable income investments such as a business ownership in equities or even property ownership Investing is done with the purchases of goods which are not for immediate consumption but for the future with the sole purpose of creation of capital or the goods which are fairly capable of providing other goods or services, the expenses incurred in education and the health is simply investment in human capital whereas the expenses incurred in research and development comes in the category of intellectual capital. Moreover the return of investment (ROI) is the main measure of any organization’s performance. The mutual fund industry came into being in 1963 when the Unit Trust Of India (UTI) in the year 1963 as an initiative by the government of India and of course the Reserve Bank Of India and later on in the year 1987 the SBI Mutual Fund became the first non UTI Mutual Fund in India came into being. Later on in the year of 1993 heralded the new era in the Mutual Fund Industry which was the entry of private companies in this sector. In the year of 1992 Securities and Exchange Board of India (SEBI) act was passed and SEBI Mutual Fund Regularities came into being and the Mutual Fund industry has not looked back and has grown exponentially ever since as even the foreign institutions have come up with the acquisitions and joint ventures and the year 1995 saw the establishing of a nonprofit organization—The Association of Mutual Funds in India with the sole objective to promote healthy and ethical marketing practices in the mutual funds industry in India. SEBI has made AMFI certification as compulsory for everyone engaged in marketing of mutual fund products.   One mode of investment is the Mutual Fund and as the name suggests the mutual fund is a investment instrument which definitely allows several investors to pool their resources in order to purchase stocks, bonds and other securities and these collective funds are called Assets Under Management (AUM) are then invested by an expert fund manager who is appointed by a mutual fund company called Asset Management Company (AMC), and the total underlying holding of the fund is called the portfolio and each of the investor owns  a portion of this portfolio in the form of units.
The Mutual Fund: - The word Mutual Fund in itself is too terrifying alien for many and simply too terrific for the select few. The word Mutual Fund appears to be another financial jargon but once understood than one can gain a lot in financial terms.

Investor’s pool their money ----- the expert fund manager invests this pooled money in the securities----- the income and the dividends thus generated is distributed between the share holders accordingly, it offers multiple ease of the money being managed by an expert with diverse portfolios affordability as well as liquidity as well as the tax savings. As an investor you simply own the units which only represent the portion based upon the amount invested by you as an investor so all the investors are also called as the unit holders. The growth in the value of the investments along with the other various incomes earned from it are given to the unit holders or the investors in proportion to the number of the units owned by them and that too after all deductions of expenses incurred.

There are certain myths correlated with the Mutual Funds and one of them is that the mutual funds is the cup of tea of the experts in financial fields only and the investments are done only for the long terms only where as the fact is that the investments in the mutual funds can be done for a day to even for few weeks however the investments done for long term have some advantages over the short term investments. People usually also associate the  mutual funds with the equity funds whereas it is not entirely true, the mutual funds invest in variety of assorted instruments varying from equity and debt and within the debt the investment can also be done in debt instruments which mature within a day from money market instruments varying maturity from 1 to 10 years . People also have a misconception about the mutual fund with low NAV to be better than the one having higher NAV, what matters is the return on the invested funds ultimately. Mostly people think that they need to have large sum to invest in the mutual funds whereas most of the funds today allows an investment as low as Rs1, 000/- with no upper limit on the investment amount and infact even for the equity linked saving instruments the amount is as low as Rs500/- and moreover there is no monthly or annual maintenance charges even if you do not transit further.  Then there is also SIP facility which enables you to invest in small amounts on regular basis and moreover you do not need a Dmat account to invest in a mutual fund as you can invest in multiple ways like offline by filling up a form and also online through a choice of various websites. If you do have a Dmat account than you can consolidate your mutual funds holdings of course along with the other holdings in the Dmat account, you can buy mutual fund from the same mediator from where you buy and sell shares in the exchanges. One more misconception is that the NAV have reached the peak but it only reflects upon the market value of the shares held by the fund on any given day and basically the NAV is high only due to the good performance over a period of years. To understand NAV, just like as the share is given a price so similarly a mutual fund unit has an NAV it only represents the market value of each unit of a fund or the price at which an investor can buy and sell the units. The NAV is calculated on the daily basis which only further reflects the combined market value of the shares, securities or bonds held by a fund on any given day.

One must however understand how the mutual funds works and also its power as well as the benefits, let a take a case of one crate of cold drink having 24 cans costing Rs 400. Let us say that four friends wish to buy the can of cold drink but the retailer sells only the crate and each of the friend has Rs 100 only so these friends decide to pool in their money and purchase the crate of cans, each friend gets six units of can if equated with mutual fund and the cost of one unit of can simply divide the total amount with the total no of cans that is 400/24=16.66 and conversely if you multiply the number of units 6 each with cost per unit you get the initial investment of Rs 100 each that is 16.66 x 6=100 which happens to be the initial investment cost. This is just a case where each friend is a unit owner or unit holder in the crate of 24 cans which is collectively owned by all the four friends and each of the friends is a part owner of the box.





1) Debt Mutual Funds:- There are various types of funds and it all depends upon the need which is to be catered either the long term or the short term investment plans and you must choose the funds accordingly as the debt funds depend upon borrowing so there are certain conditions laid down when one borrows like the assurance of returning the principal amount, the interest rates and so also the time frame when the amount will be returned. The money is required by everyone to run its operations it may be the companies, state or the central governments. They offer various debt instruments like debentures, G secs, T bills etc and the mutual funds buy the debt which are issued by them. The debt funds bring the stability in your investment portfolios because they are lower in risks as compared to the equity funds although a little riskier than the liquid fund and their aim in itself is to generate steady returns as well as sustaining your capital by investing in government securities NSD, CPs bonds and other fixed income securities and also lending money to corporate and organization in anticipation of fixed interest rates and therefore investing in the debt mutual funds is ideal if one is looking for higher returns than the liquid funds over a medium term horizon of a quarter to 24 months.

2) The Equity Mutual Funds:- Unlike the debt funds here you just have no assurance of the principal, rate of interest or the tenure while investing in the equity funds, as when you invest in the equity mutual funds you are as a owner of a particular company in which you have invested in as per your extent of investment. So just like the owner of that company even your profit is also linked with the performance of the company the more are the profits of the company the better is the share price and hence even your gains are better too. More the risk more are the gains and so even the equity funds also carry  the potential of returning high outputs and just to counter the risks the mutual funds are invested in multiple companies and multiple sectors and this diversification of investments helps in minimizing running into a risk. In case of long term investments one needs some guidance to counter the inflation.

 3) Hybrid Mutual Funds:- They are also called as liquid mutual funds too, and liquidity in financial terms simply means how fast can you get back your investments, a highly liquid  asset is as good as hard cash. The Hybrid funds have minimum risk factor and can give you returns better than the returns of a savings account as they are invested in faster manufacturing debt securities and this makes them as little less risky because here the concept is that more closer the debt instrument is towards its maturity the greater are the chances of you getting the principal amount as well as the interest too. Although the savings account is best option for the emergency funds and going by its name the savings is a saving option and it offers the highest liquidity as you can access the amount through bank during emergency. Just in the case when you have some amount in excess to the emergency funds then the liquid funds are a good option to invest in for a period ranging between 10 to 60 days as upon valid redemption of your request you get your money back on the next working day itself. Hybrid funds are the combination of various asset classes like debt and equity in their portfolios having hybrid blend of funds.

The Mutual Funds are not even flexible but also liquid too, because different people have different patterns of earnings as well as spending and so the investments need to be flexible too from investing in the money markets to equities with a minimum amount of investing as low as Rs500/- and has no upper limit of investment and in case of the open ended funds even daily investment and withdrawal is permissible and you can receive the investment in 1-5 working days with incurring ant maintenance charges  on the portfolios, here you can invest directly or through asset management company of mediator too. So we can say that the mutual funds are safe as well as transparent too because the mutual funds publish a monthly sheet which points out at all the aspects about the scheme u have invested in and also the rating of the company in case of a debt fund and more so NAV is also published on the websites daily. More over the mutual funds also helps you to diversify your investments thereby minimizing the risks, spreading your investments always helps you lowering the risks in multiple companies as well as multiple sectors.


Making a habit of investing at an early age helps as it maximizes the end returns in the long terms. One must be able to analyze the investment amount as well as the investment instrument and the risk taking capacity as when you are at the start of your career you have lot of time by your side to attain your financial targets as well as calculated risk taking capabilities investing in equities, large, middle and small cap funds and a mix of diversified equity funds. Then in the middle of your career you are at the major earning capability of your life generally speaking so you can leverage your targets as you are a bit relaxed and settled in your life as you are done away with major EMIs and children heading for the higher education and this is the stage you should shy away from any of the risk prone investments that is investing in the debt funds a little bit in the high yielding equity and investing in properties also go for the diversified as well as the balanced funds too and as you are nearing your retirement stages one must head for the least risk zones of investments wherein you must focus upon with priority of safety and growth of your savings at this stage do not try to invest in property assets but invest in short term debt funds and be your usual self of a disciplined investor.