Mutual Funds
Mutual Funds
A mutual fund is a type of investment vehicle that pools money from a large number of investors to purchase securities such as stocks, bonds, and other assets. The mutual fund is managed by a professional money manager, who makes decisions about what securities to buy and sell based on the fund’s investment objective. The value of an individual’s investment in the mutual fund will increase or decrease based on the performance of the securities that the mutual fund holds.
Mutual funds are considered to be one of the most popular and easy ways for individuals to invest in a diversified portfolio of securities, as they provide access to professional management and a diverse range of assets that would be difficult or expensive for an individual to purchase on their own.
There are several reasons why people choose to invest in mutual funds:
Professional management: Mutual funds are managed by professional money managers who have the expertise and resources to research and select a diversified portfolio of securities.
Diversification: Mutual funds provide access to a wide range of securities, allowing investors to spread their risk across multiple assets. This can help to lower overall portfolio risk and increase the potential for returns.
Affordability: Mutual funds can be bought and sold at a low cost and with small investment amounts, which makes them accessible to a wide range of investors.
Liquidity: Mutual funds are generally easy to buy and sell, making them a convenient way to access cash in times of need.
Convenience: Investing in mutual funds can be done through a simple process and can be easily included in a long-term financial plan.
Tax advantage : You can also benefit from certain tax advantages when you invest in mutual funds.
Low Cost : Mutual Funds achieve economies of scale as they collect and invest large sums of money. The cost of running a Mutual Fund is divided between a larger pool of money and hence Mutual Funds are able to offer you a lower cost alternative of managing your funds.
Benchmarks : All Mutual Fund schemes have a benchmark and one of the mandate given to the Fund Managers is to generate returns that beat the respective Benchmark within the risk parameters of the scheme.
Inflation Beating Returns : Historically Equity and Equity oriented funds have generally given inflation beating returns as Equity asset class has given good returns in the past and mutual fund schemes have mostly outperformed their respective benchmarks.
It’s important to note that for Investors we consider their risk tolerance, investment time horizon and personal financial situation before making any investment decisions.
In India, there are several ways to invest in mutual funds:
SIP (Systematic Investment Plan): With SIP, you can invest a fixed amount of money at regular intervals (e.g. monthly) in a mutual fund scheme.
Lumpsum: You can invest a lump sum amount in a mutual fund scheme, either through an offline or online channel.
There are couple of ways to deinvest or redeem your investments in mutual funds in India:
SWP (Systematic Withdrawal Plan): With SWP, you can redeem a fixed amount of money at regular intervals (e.g. monthly) from your mutual fund units.
Lumpsum: You can redeem a lump sum amount of your mutual fund units, either through an offline or online channel.