WHAT IS MUTUAL FUND & WHY ONE SHOULD INVEST IN MUTUAL FUND?

Investors who want to share a common financial goal and do not want to take risk of capital market directly ,they pour the fund in a mutual funds ,which is a trust and manage the fund of investors by the investment committee under the leadership of Fund Manager. Following is a cycle of Mutual Fund.

INVESTORS POOL THEIR MONEY IN MUTUAL FUND MUTUAL FUND INVEST IN SECURITIES GENERATES PROFIT RETURNS PASSED BACK TO INVESTORS RETURNS BY WAY OF DIVIDEND IS TAX FREE NO INCOME TAX IF, INVESTOR BOOK PROFIT AFTER 1 YEAR

MF is a good vehicle to ride for new comers in capital market, which allows you to take exposure in the instruments, which is out of reach for a common man and we get expert services of a professional fund manager who looks after our valuable fund. Now MF is become a fancy for all category of investors as the return in the last 3 years are fantastic. MF does not give any assurance in terms of return, but history has proved that the Investment in MF is safe, liquid, highly remunerative, convenient, Transparent, Tax benefit and free of tense . There are categories in MF depending on its life, investment objective etc like: Based on assets class: Equity, Debt, Money Market, Gilt fund. Based in time period: Open Ended fund, close Ended fund, Interval fund. Based on investment Objective : Income fund, Growth fund, Hybrid fund. A small investor can also take benefit of fluctuation of capital marker through MF by investing via SIP ( Systematic Investment Plan) method which is just like bank R D a/c. Small amount of Rs: 100/= per month can be invested in MF and there is a variety of funds available as sectorial fund, Large cap fund , Small & mid cap fund, Fixed Maturity fund ,Balance fund ,Gilt fund ,Income Fund etc. Investment is flexible so it is convenient and ess risky. Secondly SEBI , the mutual Fund regulator, has clearly defined rules, which govern MF.It takes care of investors. All open ended MF disclose their Net Assets Value ( NAV ) daily and entire portfolio on monthly basis. Investors are advised to invest through AMFI registered advisors only and no cash transactions are allowed in cash. More ever Pan No is compulsory in all ransactions.

Benefits Of Mutual Funds 1. Simplicity: Mutual Funds Are Easy to Understand Anything can be made into something more complex than it needs to be and mutual funds are no exception to this truth. However, mutual funds require no experience or knowledge of economics, financial statements, or financial markets to be a successful investor. For beginners, here is a simple definition of mutual fund: A mutual fund is an investment security type that enables investors to pool their money together into one professionally managed investment. Mutual funds can invest in stocks, bonds, cash and/or other assets. These underlying security types, called holdings combine to form one mutual fund, also called a portfolio. In different words, Mutual funds can be considered baskets of investments. Each basket holds dozens or hundreds of security types, such as stocks or bonds. Therefore, when an investor buys a mutual fund, they are buying a basket of investment securities. Simple! Yes, there are many things to know about mutual funds but compared to the broad world of financial products, mutual funds are quite easy to use and understand 2. Accessibility: Mutual Funds Are Easy to Buy Mutual funds are offered at brokerage firms, discount brokers online, mutual fund companies, banks, and insurance companies. Even beginning investors can easily open an account at a no-load mutual fund company, such as Vanguard Investments, and open an account within minutes. 3. Diversity: Mutual Funds Have Broad Market Exposure One mutual fund can invest in dozens, hundreds, or even thousands of different investment securities, making it possible to achieve diversification by investing in just one fund. However, it is smart to diversify into several different mutual funds. 4. Variety: Mutual Funds Come In Many Different Categories and Types As you grow your portfolio of mutual funds, you will want to diversify into various mutual fund categories and types. You can invest in mutual funds that cover the main asset classes (stocks, bonds, cash) and various sub-categories or you can even venture into specialized areas, such as sector funds or precious metals funds. 5. Frugality: Mutual Funds Cost Less to Manage Than Other Portfolio Types Costs as a percentage of assets in the portfolio are usually lower for an actively-managed mutual fund when compared to an actively-managed portfolio of individual securities. When you add up transaction costs, annual fees paid to a brokerage firm, and the cost for research tools or investment advice, mutual funds are less expensive than the typical portfolio of stocks. Other variables influence the cost of managing a portfolio, such as the amount of trading activity, the size of transaction, and taxes. 6. Professional Management: Mutual Funds Have a Team of Professionals Researching and Analyzing Investments So You Don't Have To! Perhaps the greatest benefit of all is that investors can save countless hours of time, energy and frustration involved with the research and analysis required to find quality investments to hold in a portfolio. That's not to speak of the skill, desire and patience required to do a job well in any professional pursuit. Mutual funds enable investors to do more of the things in life they enjoy rather than spending time and energy on investment matters. 7. Flexibility: Mutual Funds Have Several Uses and Applications All of the above benefits of mutual funds overlap into simplicity and flexibility. You can invest in just one fund or invest in a wide variety. Automatic deposit, systematic withdrawal, dividends, short-term savings, long-term savings, and nearly limitless investment strategies make mutual funds the best overall investment type for both beginners and advanced investors. Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.