Mutual Funds
To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. A Mutual Fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
Types of Mutual Fund
1. Equity or Growth Funds-
* These invest predominantly in equities.* They have the potential to generate higher return and are best for long term investments.
* The primary objective is wealth creation or capital appreciation.
2. Income or Bond or Fixed Income Funds-
These invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.3. Hybrid Funds
These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.Start investing in a Mutual Fund . One can invest in Mutual Funds by submitting a duly completed application form along with a cheque or bank draft at the branch office or designated Investor Service Centres (ISC) of Mutual Funds or Registrar & Transfer Agents of the respective the Mutual Funds. A Mutual Fund Distributor may be an individual or a non-individual entity, such as bank, brokering house or on-line distribution channel provider.
Important Benefits of Mutual Funds
1. Diversification - One of the most prominent advantages of investing in mutual funds is diversification. It is the process of spreading a given investment over multiple assets classes. Diversification helps us create an assorted portfolio that segregates the headwinds experienced in various sectors. Money is invested in a mixture of assets according to one’s risk appetite.2. Professional Management - A lot of investors do not have the time or resources to conduct their research and purchase individual stocks. This is where professional management becomes quite useful.
3. Tax Benefits - The tax benefits associated with a particular kind of mutual fund is perhaps what draws most investors to this investment vehicle. To encourage investments in mutual funds, the Government of India offers several tax benefits.
4.Higher Return on Investment (RoI) - All investors aim to achieve a higher RoI by investing in financial instruments such as mutual funds to beat inflation and increase their wealth of the long-term.
5.Easy Investment - It is very easy to invest in mutual funds, i.e. you can do this either online or offline.