A mutual fund is an investment vehicle that, in essence, collects and pools money from a number of investors and invests it across different asset classes: equities, debt, and hybrid instruments. Each investor is given units of the fund that represent a portion of the fund’s holdings. A professional fund manager manages investments on behalf of investors, choosing where to invest based on a predetermined objective of the fund and prevailing market conditions. There are four types of mutual funds: equity funds, debt funds, hybrid funds, and index funds.
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The Growth of Online Mutual Fund Apps
The establishment of the online mutual funds app opened the doors to easier access and convenience for a larger investor base. Investors can open accounts, submit KYC (Know Your Customer) requirements, search funds, and invest in a matter of minutes via computer or smartphone. Besides these, the apps allow tracking of performance, portfolio analysis, and automatic investments, such as through a Systematic Investment Plan.
Other than that, the apps contain setting goals, asset-allocation suggestions, and risk profiles. Some target new investors, while others cater to investors with some experience and prefer more customized investment options. Most of these platforms partner with SEBI-registered distributors and asset management companies to ensure safety and compliance.
Important Features of Online Mutual Funds App
Typically, an online mutual fund app has the following features:
User Dashboard: This provides information on relevant portfolio value, returns gained, recent transactions, and all information regarding the SIP.
Fund Explorer: It allows searching and comparing based on various fund types, asset classes, or AMC.
SIP and Lumpsum Investments: Regular as well as one-time investments in the selected mutual funds are enabled.
Alerts and Notifications: Informing investors about NAV variations, SIP due dates, and market updates.
Tax Reports and Statements: Suited for tax filing by providing account summaries and statements regarding capital gains.
The features assist investors in making informed choices. However, before committing to any fund, an investor should concern himself with the objectives of the fund, expense ratios, and historical performance.
Strategies for Choosing Mutual Funds for Long-Term Wealth Creation
Investors, with an emphasis on considering a long-term horizon, seek out mutual funds whose objectives are set for more than 5 years. Such a horizon may lead to the choice of the equity funds related to large-cap, mid-cap, and diversified equity funds. Balanced exposure may be sought in hybrid funds, keeping such investors in view.
Some aspects that investors consider are
Fund Type: Investors choose, based on risk tolerance, equity, debt, or hybrid.
Investment Horizon: Long-term goals are likely to be matched by equity-oriented schemes.
Fund History: Past NAVs among the data may show how some funds behaved through various market cycles.
Expense Ratio: Over time, the lower the expense ratio, the better for net returns.
Consistency and Strategy of the Fund Manager: The fund has been analyzed by investors to check whether it has been managed consistently and as per the predetermined strategy.
Investors might want to review some information on the scheme document (SID) and key information memorandum (KIM) of any mutual fund under consideration.
The Best Online Mutual Funds for Long-Term Wealth Creation
The term ‘best’ online mutual funds for long-term wealth creation is specific to each investor and varies according to individual goals, risk appetite, and market outlook. Generally, these app-based mutual funds group collections of available funds operating under different themes like tax savings, child education, or retirement planning.
Some of the types of funds that would likely appear on their list include
Large Cap Equity Funds: Generally invest in companies with established business models that have been performing credibly over the years.
Mid-Cap and Small-Cap Funds: Give access to the businesses at their creative phase with the potential for growth.
ELSS (Equity Linked Savings Scheme): The tax advantage under Section 80C benefits comes with a lock-in period of 3 years.
Multi-Cap Fund: Invests in large-cap stocks, mid-cap stocks, and small-cap stocks for diversification.
The Balanced Advantage Fund: The fund strategically alternates between equity and debt based on the prevailing market situation.
With the research tools available on the applications, investors can analyze these options on measurable parameters such as standard deviation, Sharpe ratio, and alpha.
Conclusion
In the ways in which investors access mutual funds online, the doors have opened to a variety of segments of investors. From working for investments for retirement, through education, to general wealth creation, mutual funds are now turned to for long-term financial consideration.