Things you must know before investing in mutual funds

A mutual fund is a pool of money created by collecting funds from various investors having a common financial objective. This financial vehicle offers investment in securities such as stocks, money market instruments, bonds, and other assets. The mutual fund investment are managed by professionals who allocate the assets to get capital gains or income for the fund’s investors. The mutual fund portfolio is maintained to meet the investment objective stated in its prospectus.

Not every individual entering the market has a knack for investing. However, mutual funds give a chance to individual investors to get aid from professionally managed portfolios of bonds, equities and other securities. Every shareholder is therefore subject to the gains or losses made by the particular fund. Mutual funds investment is made in various securities and their performances are tracked as a change in the total market cap of the chosen fund. A share of mutual funds represents investments in various stocks or securities and not just a single holding, which is why the price of mutual funds is also referred to as Net Asset Value (NAV). The NAV of the fund is calculated by dividing the total security value in the portfolio by the total amount of outstanding shares.

mutual fund investment

How are mutual funds classified based on asset class?

  1. Equity Funds – Equity funds are primarily invested in stocks, therefore, are also known as stock funds. These funds invest the money pooled in from various investors in shares/stocks of various companies. The performance of the invested shares is the driving factor for the gains and losses made. Equity funds are trusted to generate a huge return on investments over the long term and thus, the risk associated with it is also higher.
  2. Debt Funds – Debt funds are invested in fixed-income securities such as bonds and treasury bills. Some of the fixed income instruments are Fixed maturity plans (FMPs), short term plans, liquid funds, and monthly income plans. Such funds can bring significant returns for passive investors aiming at regular income as it comes with fixed interest rate and maturity date.
  3. Hybrid Funds – Hybrid funds, also known as balance funds, are a mix of bonds and stocks. These funds bridge the gap between equity and debt funds. The ratio can be fixed or variable. To make it simple, it takes the best of both the funds and allocates assets in stocks and bonds to achieve the set goal. Hybrid funds make a great choice for investors looking to take more risks for debt plus returns benefit.
  4. Money Market Funds– Just the way investment is made in the stock market, investment is also made in the money market that is cash or capital market. These funds are operated by the government in association with banks and other financial institutions by issuing securities such as bonds, treasury bills, dated securities and certificates of deposits. In these funds, your money gets invested and disbursed in regular dividends by the fund manager. Opting for a short-term plan can reduce the risk of investment on such funds.

Mutual funds investment is of dual nature as it is an investment as well as a share in a company, which means that the investor has partial ownership of the mutual fund company as well as its assets.

International Flight Booking Checklist – 5 Mistakes to Avid

Flying out somewhere? Before you attempt to book your international flight tickets online, check out these pointers to avoid making certain common mistakes that may complicate your journey.

Let’s go over the things that you usually do when you decide to travel by air. You set a date, pack your things, plan your route and book the flights. But do you stop to consider whether there is a better time to book the flight, whether you overlooked a detail that may delay your journey or whether there is a way to get more out of the money that you are spending on flying? Isn’t it better to learn from the mistakes that other flyers commonly make than learning from your own unpleasant experience? Here are some things to make a note of:

Booking at the Last Minute

Airlines usually offer the best prices for booking a seat on their flights 45-60 days before the travel date. Delaying your bookings can impact the prices by a huge extent. However, there is a small catch here. For international destinations that require a visa to board the flight, booking tickets at the very last minute (approx 12-24 hours before the flight) could actually help you get the lowest prices. However, it may depend entirely on the availability of seats until the last moment. Hence, it may be prudent to plan your travel in advance and book tickets timely.

Entering the Wrong Passenger Details

Spelling mistakes, wrong date of birth, forgetting to renew an identity card on time, etc., will put you through unnecessary security examinations and delay your journey. While filling in the details of passenger identity at the booking portal, make sure to put in information that matches the identity proof of the passenger.

Not Being Clear about Baggage Allowance Rules

The baggage allowances for domestic and international flights are different. Exceeding this limit will cause you to pay extra. The allowance is clearly mentioned on the airline websites. If you find yourself exceeding the allowance, check to see if there is a way to pay for extra baggage while booking the flight rather than at the airport. Pre-booking offers many advantages and makes checking in easier.

Choosing the Wrong Connecting Flight

While booking a connecting flight, go for flights from partner airlines so that you are compensated in case a delay in the first flight causes you to miss the second. Also, watch out for the time you are getting to change flights and whether you need to check-in your baggage again. Unless you account for these things, you may not make it to the next flight on time. Also, check for transit visa rules if the stopover you are making at is an international location. Changing airlines may sometimes require to you change terminals for which you may need a day-visa or a transit visa.

Not Earning Air Miles

Flight tickets can be an expensive component of your travel budget. Hence, it is important to be prudent when booking tickets. One of the biggest mistakes, new and non-frequent travellers make is not making use of the air miles program. International tickets can be expensive and earning air miles while you book flight tickets can help you bring down the cost of your travel by a huge extent. Joining these programs is usually free of cost, and you can redeem the points for your return journey or other privileges such as booking hotels, cabin up-gradation, etc.

Technology has given us faster ways of travel and convenient ways of booking such transport. One of the reasons why people prefer travelling by air over travelling by road, is the smooth and systematic flow of things that air journeys offer. Speed and comfort are what you pay for when you choose to book your flight tickets online. If you take care of these minute details and pay attention to the fine print, then nothing can stop you from getting the best of everything you signed up for.