What is Mutual Funds
What is Mutual Fund
Mutual Fund is a trusted process to collect money from a wide number of investor whose object are invest to a common object. In this process investor money are invested in the security, such as stocks, bonds, short-term debt, gold and others assets and which provide a potential returns from market. This fund is managed by an investment Professional known as a fund Manager. The gains or loss on the investment are shared collectively by the investors in proportion to their contribution to the fund.
Investors can buy and sell mutual fund shares at the current net asset value (NAV), which represents the total value of the fund’s assets minus any liabilities, divided by the number of shares outstanding. Mutual funds typically charge fees and expenses, including an annual management fee, sales charges, and operating expenses, which can impact the overall return of the investment
There are many different types of mutual funds available, including equity funds, bond funds, money market funds, index funds, and target-date funds, among others.
Benefits for Investment of Mutual Fund
- Flexibility – Mutual Fund investments offer lot of flexibility with features such as systematic investment plans (SIP), systematic withdrawal plans, and dividend reinvestment.
- Diversification – Risk is lowered with Mutual Funds as they invest across different industries & stocks.
- Affordable – They are available in unit price which is makes it very affordable. The large corpus, even a small investor can benefit from its investment strategy.
- Liquidity – In open-ended schemes, you have the option of withdrawing or redeeming your money at any point of time at the current NAV.
- Professional Management – Expert Fund Managers of the Mutual Fund analyses all options based on experience & research.
- Potential of return -The fund managers who take care of our Mutual Fund have access to information and statistics from leading economists and analysts around the world. Because of this, they are in a better position than individual investors to identify opportunities for your investments to flourish.
- Low Costs – The benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.
- Tax Benefits – Mutual Fund Investor are entitled to get Income Tax Benefits under section 80C.
Type of Mutual Fund
There is mainly three type of Mutual Fund
- Debt funds: Debt funds is also known as fixed income fund which is invest in the assets of Government securities bonds These funds aim to offer reasonable returns to the investor and are considered relatively less risky. If you want to invest in low risk fund so, you can move with this.
- Equity funds: In compare to the debt funds, equity funds invest your money in stocks. Capital enjoyment is an important purpose for these funds. But since the returns on equity funds are linked to market movements of stocks, these funds have a higher scale of risk. They are a good choice if you want to invest for long term goals such as retirement planning or buying a properties as the level of risk comes down over time.
- Hybrid funds: This type of fund general mix fund investment combination of both equity and debts. Based on the allocation between equity and debt, hybrid funds are further classified into various another categories.