Mutual funds are investments that promise you returns when invested correctly and wisely. The sole motto behind investing in any mutual fund is that money is used for recent purposes or to be fixed so as to use after retirement which is basically a kind of security for later stages of life.
A company that invests in a mutual fund hires a portfolio manager who takes up the responsibility of investing in companies, real estate or any other assets. He is paid a pre-decided percentage of assets and works towards making high returns.
The returns from mutual funds vary from scheme to scheme. While debt mutual funds are for those who are not comfortable with extra risk factors and are satisfied with regular returns, equity mutual funds are for those who wish to earn extra returns and who can cope up with high-risk factors.
Now that you have decided and prepared yourself about the risks and ups and downs, here are the ways by which you can earn money through mutual funds:
This is one of the safest and convenient options as it provides returns on a monthly basis. But it is dependent on profits made by the scheme. So if there isn’t any profit there won’t be any dividend.
This refers to the Systematic Withdrawal Plan. The concept is somewhat similar to SIP except for the fact that we got to take it the other way. SWP allows you to withdraw a particular amount of money every year while in SIP you invest.
- Growth option:
This option in mutual fund schemes reinvests profits. So this will help you with benefits from compound interest over a long period of time. This is the option for those who are comfortable with returns after a long time.
- Capital Gains:
Capital gains are one of the most obvious ways of earning through mutual fund investments. When you invest your money in an asset and then resell the asset when the selling price is comparably more than the buying price the profit made is called Capital Gains.
These were the few gateways to take you to your destination of mutual fund investment. For more information refer to https://www.investopedia.com/university/mutualfunds/mutualfunds.asp.