Mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors. The money collected is then invested in stocks, bonds or other securities. A mutual fund is managed by a professional fund manager who strives to grow the fund by making investments that will yield high returns.
Mutual funds offer investors a number of benefits, such as:
- Diversification: Mutual funds allow investors to diversify their portfolio and mitigate risk.
- Professional management: Mutual funds are managed by professional fund managers who have the expertise and knowledge to make sound investment decisions.
- Provides higher returns
- Convenience: Mutual funds are a convenient way to invest in a diversified portfolio of securities.
- Liquidity: Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a mutual fund scheme.
- SIP (Systematic Investment Plans), STP (Systematic Transfer Plans) and SWP (Systematic Withdrawal Plans) are available.
- Allows minimum investment through SIPs, thereby reducing risk.
- Investing in mutual funds for a long time providing the investor with the power of compounding.
Limitations of Mutual Fund:
- No control over costs
- Lack of Portfolio Customization
- No Guaranteed Returns
- Choice Overload
Type of Funds:
- Equity Schemes: Invests in stocks of companies.
- Debt Schemes: Invests in bonds, government securities, and treasury bills.
- Hybrid Schemes: Invests in a mix of equity, debt and gold.
- Solution-oriented Schemes: Invests across asset classes and caters to specific investor goals like retirement planning and children benefit.
- Other Schemes: Exchange Traded Funds (ETFs), Index Funds and Fund of Funds (FOFs)
Mutual Funds are completely safe, since it is regulated and supervised by SEBI.
If you are looking for an investment vehicle that offers all these benefits, then mutual funds are the way to go!
| Possible Goals | Time Horizon | Mutual Fund Category |
|---|---|---|
| Contingency Funding, Park your Bonuses & Windfalls |
Very Short term (< 1 year) | Liquid Mutual Funds |
| Car Purchase, Holidays, Park Retirement Corpus for Fixed Income |
Short Term (1 - 3 Years) | Debt Mutual Funds |
| Car Purchase, House Purchase, Start-Up Funding |
Medium Term (3 - 6 Years) | Hybrid Mutual Funds |
| Dream House, Children's Education, Children's Marriage |
Long Term (6 - 10 Years) | Diversified Equity Funds |
| Retirement, Children's Future, Wealth Creation |
Very Long Term (10+ Years) | Diversified, Mid-Cap, Small-Cap, & Sectoral Funds |
Disclaimer: Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully.
0 Comments