Mutual Funds

To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. Essentially, the money pooled in by a large number of people (or investors) is what makes up a Mutual Fund. This fund is managed by a professional fund manager. It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. Simply put, a Mutual Fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

What Are Mutual Funds

What are the benefits of investing in Mutual Funds?

Professional fund management is one of the key benefits. There are several others like diversification, affordability, and tax benefits.

Why invest through Mutual Funds?

  • Professional Money Management: Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. Fund managers monitor market and economic trends and analyze securities in order to make informed investment decisions.
  • Diversification: Diversification is one of the best ways to reduce risk. Mutual funds offer investors an opportunity to diversify across assets depending on their investment needs.
  • Liquidity: Investors can sell their mutual fund units on any business day and receive the current market value on their investments within a short time period (normally three- to five-days).
  • Affordability: The minimum initial investment for a mutual fund is fairly low for most funds (as low as Rs500 for some schemes).
  • Convenience:Most private sector funds provide you the convenience of periodic purchase plans, automatic withdrawal plans and the automatic reinvestment of interest and dividends.
  • Flexibility: You can pick from conservative, blue-chip stock funds, sectoral funds, funds that aim to provide income with modest growth or those that take big risks in the search for returns. You can even buy balanced funds, or those that combine stocks and bonds in the same fund.

Tax Benefits