What is mutual fund & their advantages?
I’m pretty sure we have all seen the MUTUAL FUND SAHI HAI Advertisement on TV a number of times but never really bothered to take much interest in it.
A Mutual Fund is a pool of money collected from many people which is used by an experienced fund manager who invests the money in Stocks or Bonds or a combination of both depending on which scheme you choose. Not many of us are experienced in investing directly in the Stock market or Bond markets and that’s where Mutual funds come to the rescue. The fund manager is typically a person who has a lot of experience and has expertise to manage your money. The fund manager charges a small fee for his expertise (usually 1.5 to 2.5 percent) which is deducted from the investment.
Mutual fund is a business. Within the business, there are several types of mutual funds which operate which are called Schemes. Schemes are the products for a mutual fund company. What we buy are units (share) of a scheme. Like a company has number of shares, a mutual funds scheme has a number of units. The way a company has number of shares, a mutual fund scheme has number of units. Mutual fund units are allocated to Investors on basis of the proportion of investments and value of these units is called as Net Asset value (NAV) which is daily released by Fund houses.
A Mutual Fund is a pool of money collected from many people which is used by an experienced fund manager who invests the money in Stocks or Bonds or a combination of both depending on which scheme you choose. Not many of us are experienced in investing directly in the Stock market or Bond markets and that’s where Mutual funds come to the rescue. The fund manager is typically a person who has a lot of experience and has expertise to manage your money. The fund manager charges a small fee for his expertise (usually 1.5 to 2.5 percent) which is deducted from the investment.
Mutual fund is a business. Within the business, there are several types of mutual funds which operate which are called Schemes. Schemes are the products for a mutual fund company. What we buy are units (share) of a scheme. Like a company has number of shares, a mutual funds scheme has a number of units. The way a company has number of shares, a mutual fund scheme has number of units. Mutual fund units are allocated to Investors on basis of the proportion of investments and value of these units is called as Net Asset value (NAV) which is daily released by Fund houses.
Mutual Funds in India are gaining a lot of popularity and as more people are becoming a part of the capital markets mutual funds are becoming an important product for investment. Mutual Funds indeed carry someone amount of risk, but NO RISK NO GAIN.
Advantages of mutual funds
Low investment:
As a beginner, you can start investing in mutual funds with an amount as low as Rs 500 every month through SIP.
Professionally managed:
You have a professional Mutual fund manager managing your investments. You don’t have the
Tax benefits:
Investing in Equity Linked Saving Scheme (ELSS) gives you a tax benefit of 1.5 Lakhs under section 80C of the Income Tax
Diversification:
Mutual funds investment does not invest in just one stock or sector, rather they invest in a range of sectors. It reduces risk through
Higher returns than fixed deposit:
In terms of returns, Mutual funds are a better option as compared to fixed deposits.
Well regulated:
Mutual Funds are regulated by SEBI (Securities and Exchange Board of India), which protects the investors interests.
Varied types of funds available:
SEBI has introduced a total of 36 schemes in mutual funds. Investors can choose from any of the schemes according to their investment goal