Is Your Hard-Earned Money Safe in Mutual Funds? People often invest their hard-earned money in mutual funds. In this scenario, many people have a question in their minds – will our hard-earned income go to waste?
The fear of losing money after investing in mutual funds is natural. This fear arises because we continuously invest money in mutual funds through SIP, and mutual funds have a direct connection with the stock market. If there is turmoil in the stock market, it directly impacts mutual funds.
So, if you want to know if money can really sink into mutual funds, after reading this special article till the end, you will get a clear understanding of whether money can really sink into mutual funds. If yes, then why, and if not, then how.
Can money sink into mutual funds?
You may have invested in mutual funds through a bank, an AMC website, or platforms like Upstox, Zerodha coin, or Groww app. In all these cases, there is a person who manages your funds, known as a fund manager.
It should be noted that the fund manager’s earnings come from the money you have invested. If they do not receive commission, it becomes difficult for them to run their households. Therefore, it is the responsibility of these fund managers to invest the money you have placed in good companies.
The money you have given to mutual fund companies does not stay with them, and they cannot keep this money with them because of SEBI regulations. Therefore, these companies invest your money in stocks of different companies.
Your money is not invested in just one company, but is invested in 50 or even more companies. Moreover, this money is not invested only in companies from one industry, but the choice is made from different companies in each industry, and the money is then invested in them.
Suppose, for some reason, a particular industry crashes or faces a business slowdown. Businesses associated with other industries will still continue, and the profits earned will be distributed to the shareholders, which you can also see in your mutual fund account.
For example, you must remember the time of COVID. It was a time when people felt that everything was going to end, so many were withdrawing money from their bank accounts. At this time, many banks were on the verge of shutting down, and the stocks associated with the banks were also plummeting.
Similarly, people stopped buying jewellery, which affected the jewellery business. However, other companies were still operating as they were dealing with products essential for people’s daily lives.
Hence, companies running mutual funds invest money in different sectors. Thus, if one industry faces a slowdown or closure, the business of companies related to other industries will continue, covering the losses with profits from other companies, since there are more than 5000 companies listed in the stock market, and the business of all companies cannot be shut down simultaneously.
Even if it does, it will not only affect one company, but the entire country’s economy will be affected, leading to a financial crisis. There will be distress all around the country.
If you still have doubts about whether your money can sink into mutual funds, it depends on the fund in which you are investing, and how good it is. An estimate of this is made based on the total amount in the mutual fund. If a mutual fund has funds worth billions of rupees, people have a lot of trust in it. In this way, the chances of your money sinking in such mutual funds are very low.
Besides, the question of whether money can sink into mutual funds depends on who is managing your money. If the mutual fund manager has 5 to 10 years of experience, it means that your money is being managed by the right person.
Even after receiving so much information, if you still have doubts about whether your money can sink into mutual funds, you should look at the performance of the mutual fund in which you have invested for the past 5-10 years. If the mutual fund company has provided better returns annually compared to the previous year, it means that you have invested in the right mutual fund, and your money will not sink. (8 Best Ways To Make Money From Bank: What is required to earn money from the bank?)
If I invest ₹10,000 in a mutual fund, how much will I get?
If we talk about investing ₹10,000 in a mutual fund for 20 years and if you receive a return of 12% annually, after the time period, you will earn a total of ₹92 lakh.
How safe is a mutual fund?
If you invest in a mutual fund for the long term, it will be very safe because of the benefits of compounding leading to good returns.
Is mutual fund investment safe?
Mutual funds are entirely market-based investments. Since there are fluctuations in the market, it can be said that mutual funds are both safe and have a certain amount of risk. However, they are managed by big professionals and experts who always strive to minimize investor’s losses and maximize their profits. Therefore, mutual funds can be considered both safe and to have a minimal amount of risk.
How long does it take for the money to double in a mutual fund?
In general, mutual funds double the money invested within 4-5 years.
What happens if a mutual fund company fails?
If a mutual fund company fails, it contacts all investors to return their invested amount. In case of any dispute, SEBI can also order the mutual fund to close. In such a scenario, the mutual fund will return all investors’ money.
When do mutual funds incur losses?
Mutual funds incur losses when there is a market downturn. Hence, it is advised to keep an eye on the market when investing in mutual funds. If the market drops by 20% from its high levels, you should switch from large-cap companies to mid-cap companies.
What return does a mutual fund provide in 1 year?
Mutual funds generally provide a return of 12% annually.
Can we invest in a mutual fund for 6 months?
In mutual funds, investments can be made through SIP, where you can invest for 1, 2, 3, or 6 months.
Which is the number 1 mutual fund company in India?
UTI Mutual Fund is known as the number 1 mutual fund company in India.
Is now a good time to buy mutual funds?
It is said that the best time to buy mutual funds is when their NAV is lower than their unit price.
Which mutual fund category is the best?
Determining the best mutual fund category depends on an individual’s financial goals and risk-taking capability. If you want your money to grow rapidly, you can opt for an equity fund; if you want your money to grow steadily, you can opt for a debt fund.
What is the safest investment in India?
The safest investments in India include schemes such as Sukanya Samriddhi Yojana, Public Provident Fund (PPF), Monthly Income Scheme, and Life Insurance Bonds.
Should I withdraw my mutual fund?
If there is a change in your financial goal, you can consider withdrawing your mutual fund and re-investing it when the time is right.
How quickly can I sell my mutual fund?
Once you buy shares, you can sell your mutual fund holding at any time.
How many times should I invest in mutual funds?
If you are unsure how many times you should invest in mutual funds, it is advisable to invest through SIP. Investing in SIP allows you to invest some money every month into mutual funds.
Can we invest in a mutual fund for 1 month?
If you want to invest in a mutual fund for 1 month, you can invest in short-term mutual funds. These mutual funds have a duration of 15 to 91 days.
When can we withdraw from a mutual fund?
The amount invested in mutual funds can be withdrawn at any time.
What is India’s largest mutual fund company?
It is said that UTI mutual fund is the largest mutual fund organization in India.
Which mutual fund has provided the most returns in the last 10 years?
Quant focused funds have provided the most returns in the last 10 years (19.03%). Following this, Nippon India focused equity funds have shown impressive returns.
What is long-term in mutual funds?
Long term refers to a long-term investment in mutual funds, which lasts for more than 3 years.
What is the best investment for 5 years?
For a 5-year period, there are various investment plans such as savings account, liquid funds, fixed maturity plans, arbitrage funds, and bank FDs.
If I redeem my mutual fund before 1 year, what happens?
If you redeem your mutual fund before 1 year, you will have to pay an exit load, and the mutual fund company will deduct a certain amount from the total invested amount.
Conclusion
This was the information on whether money can sink into mutual funds. We hope you liked the information given in this article, and you now have a clear understanding of whether money can really sink into mutual funds. If you still have any questions or doubts, you can ask us in the comment box, and we will try to answer your questions as soon as possible.
