Mutual Funds
What Are Mutual Funds
It is an investment vehicle where multiple investors come together and pool their funds. This pooled money is then invested by the fund manager across various asset classes including equity, debt, gold, and other securities to generate returns. The gains and losses incurred from such investments are divided among investors in the proportion of the share of investment.
Invest in Mutual Funds
Mutual Funds are a smart way to grow your money. They can help you achieve your financial goals as they have the potential to generate higher-than-inflation returns.
Professionally Managed
One of the key benefits of investing in these funds is that your money is managed by professional money managers who have years of investing experience.
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Liquidity
It is the ease of buying and selling an investment. Mutual Funds offer superior liquidity compared to some of the other instruments as you can buy and sell them anytime you want.
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Returns
Like any investment product, the performance of these funds are measured in terms of the kind of returns they deliver. Historically, mutual fund returns have been higher than the returns delivered by other traditional investment options like Bank FDs, RDs PPF, etc.
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Affordability
You can start your investments in these funds with as low as Rs 500. Therefore, you don't need large sums to start investing.
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Diversification
As mutual funds invest in a basket of stocks, bonds, etc., you can own a diversified portfolio even with a small investment amount, this helps reduce risk as wel I. ​
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Well Regulated
Mutual fund schemes are regulated by the SEBI. The tight regulations ensure transparent processes and protect the investors' interests.
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For a retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because:
Mutual Funds provide the benefit of cheap access to expensive stocks
Mutual funds diversify the risk of the investor by investing in a basket of assets
A team of professional fund managers manages them with in-depth research inputs from investment analysts.
Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
Financial theory states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.
No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds the controllable risks are substantially reduced.
In an open-ended mutual fund there are no limits on the total size of the corpus. Investors are permitted to enter and exit the open-ended mutual fund at any point of time at a price that is linked to the net asset value (NAV). In case of closed-ended funds, the total size of the corpus is limited by the size of the initial offer.
Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoters image are some of the key factors to be considered while taking an investment decision regarding mutual funds.
Frequently Asked Questions
For a retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because:
Mutual Funds provide the benefit of cheap access to expensive stocks
Mutual funds diversify the risk of the investor by investing in a basket of assets
A team of professional fund managers manages them with in-depth research inputs from investment analysts.
Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
Financial theory states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.
No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds the controllable risks are substantially reduced.
In an open-ended mutual fund there are no limits on the total size of the corpus. Investors are permitted to enter and exit the open-ended mutual fund at any point of time at a price that is linked to the net asset value (NAV). In case of closed-ended funds, the total size of the corpus is limited by the size of the initial offer.
Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoters image are some of the key factors to be considered while taking an investment decision regarding mutual funds.