What are Mutual Funds?

Mutual funds are financial vehicles that pool money from investors and invest them into stocks, securities, and various money-market instruments. Professionally managed, there are various categories of mutual funds depending on their underlying securities such as equity, debt, and hybrid.

Based on your risk appetite and investment horizon, you can invest in the mutual fund of your choice. You can either start SIP in mutual fund or invest a lump sum. They are one of the most prudent avenues of investment that can help you achieve your life goals.

How to invest in Mutual Fund with us?

SBICAP Securities Ltd., simplifies the process of investing in mutual funds. With us, you can buy them through either the Demat mode or the physical mode.

Additionally, with SBICAP Securities, you can invest in mutual funds through a Systematic Investment Plan (SIP). You can start a SIP to invest in MFs periodically (which can be weekly, monthly, or quarterly) as per your requirement and convenience.

Types of Mutual Funds:

Equity Mutual Fund:

An equity mutual fund is a type of mutual fund that invests primarily into equities, i.e., stocks. Also known as stock funds, the main goal of an equity mutual fund is to generate higher returns. A major portion of the assets of an equity mutual fund is invested in equity shares of numerous companies in various proportions.

If you are an aggressive investor with a high-risk tolerance, you can opt for equity mutual funds to generate inflation-indexed returns in the long term. However, to generate the desired returns, you need to stay invested for the long haul.


Debt Funds:

As the name suggests, a debt mutual fund invests a significant portion of its assets in fixed-income securities such as corporate bonds, debentures and treasury bills, among others. One of the fundamental objectives of debt funds is to protect capital from the vagaries of the stock market.

Debt mutual funds invest in a range of securities as per their credit ratings. The higher the ratings, the less volatile the security.


Hybrid Mutual Fund:

A hybrid mutual fund typically invests in two or more asset classes. These funds usually hold 60% in stocks and 40% in bonds. One of the fundamental objectives of hybrid funds is to balance the ratio of risk-reward and optimise the return on investment.

A strategic mix of debt with equity components make balanced funds less vulnerable to market volatility. Equity components of the fund can generate good returns which helps capital appreciation, while debt components shield the investment from market volatility.


What are NFOs?

A New Fund Offer or NFO takes place when a company launches a new fund on a first-subscription basis to raise capital for buying securities such as bonds, equity shares, etc. Here the opportunity to subscribe to the scheme is available only for a limited period, and because it is new in the market, its price is cheaper.

While NFO offers mutual fund investment opportunities, it is essential to check out the reputation of the fund house offering the NFO. As an investor, you must ensure that the fund house has a robust track record in the industry. The NFO can be open-ended or close-ended.

How to invest in NFOs with us?

At SBICAP Securities Ltd., you can invest in NFOs by logging into your account at our website. You can invest in NFOs through your Demat account or in a physical mode. We will assist you in every stage of the NFO buying process to ensure you make an intelligent choice.​


Types of NFOs:

Open Ended:

Open-ended funds are funds that buy and sell units on a continuous and regular basis, thereby allowing investors to enter and exit as per their convenience. In these funds, units can be bought and sold even after the NFO period.

In an open-ended fund, the number of outstanding units go up and down each the time the fund buys or repurchases the current units. It is because of this very reason that the unit capital of an open-ended fund keeps varying.


Close Ended:

A close-ended fund is opposite to an open-ended fund. Here, you can’t buy units after the NFO period is over. It essentially means that new investors can’t enter or exit until the term of the scheme ends. For investors to exit before the end of the term, the fund house lists the close-ended fund on the stock exchange.

The maturity period of a close-ended fund typically ranges from 3 to 4 years from the date of launch. Generally, a close-ended fund offers better or higher returns than an open-ended fund.