Mutual fund is emerging as one of the best ways of investing. It acts as a vehicle of wealth creation
What exactly is a Mutual Fund?
There are many of investors who wish to invest in shares or bonds. Majority of them lack required expertise and time for research that are essential for direct investments in shares and bonds. They keep a major portion of their money in savings bank accounts or fixed deposits with banks. The interest rates on these investments are often less than the inflation rate.
Mutual fund is a financial asset and a best investment option. Mutual fund collects amount from numerous investors, pools the amount and invest in shares on behalf of the individual contributors at a nominal fee. The investors are allotted units in proportion to their investment. The gains and losses are shared among the individual investors on equal basis in proportion to individual investment.
What are the advantages of Mutual Fund investments?
For an investor, the Mutual Fund investment offers a plethora of benefits and major among them are:
a. Funds are managed by qualified professionals having sufficient experience.
b. As the investment is made on behalf of a large number of investors, it is cost effective.
c. Mutual Funds are well regulated by SEBI
d. Mutual Funds permit you to decide the quantum of investment. Investments can be in lumpsum or of recurring nature starting even from Rs. 500/- p.m.
e. Investors have the freedom to choose the fund that suits their risk profile. Mutual Fund investments in bonds and Government securities carry less risk. Investments in shares carry higher risk but better returns.
f. Freedom to select suitable period. Mutual Fund investments in bonds and government securities are best suited for short term investments whereas Mutual Fund investments in shares are more suitable for medium term to long term investors.
Please go through the tutorial (Courtesy: IDFCmf.com) for better clarity.
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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