Foreword On Mutual Fund
These days you are hearing more and more about mutual funds as a means of investment for tax effective returns and wealth creation. You probably have most of your money in a bank accounts and your net-worth has gone up due to your real estate investment like house etc. Apart from that, investing is probably something you simply do not have the time or knowledge to get involved in. You are not the only one. This is why investing in mutual fund schemes through professional fund managers has become popular way of investing.
One can easily enter and exit in open ended mutual fund schemes. Numerous options are available to invest in mutual fund debt and equity schemes as per the investors requirement.
What is a Mutual Fund?
A mutual fund is a pool of money from numerous investors who wish to save and create wealth. Investing in a mutual fund is easier than buying and selling individual stocks and bonds on your own.
In mutual funds, investment are chosen and monitored by well qualified and experienced professional fund managers, who invest unit holders money to create wealth and protect investor from high inflation risk. This investment could consist of shares, money market instruments like short term and long term bonds, certificate of deposits, corporate papers etc. or a combination of those.
As an investor and unit holder of equity mutual funds, you own indirect ownership in many companies. Mutual funds allows you to invest small amount regularly to benefit from being involved in a large pool of cash invested by other unit holders/Investors. Profit /Loss is shared on an equal basis, proportionately to the amount one has invested.
Mutual Funds are Diversified
By investing through mutual funds, you diversify your investment across the large number of securities/companies to minimize the risk of investment. By spreading your money over numerous securities/companies, which mutual fund does, you need not have to worry about the fluctuation of the individual company in the fund's portfolio.
Mutual Fund Objectives.
There are many equity mutual funds schemes, each with its own goals. The investment objective is the goal that the fund manager sets for the mutual fund equity scheme he manages when deciding which stocks should be in the fund's portfolio.
For example, an objective of a Diversified Equity Fund might be: To invests primarily in the equity markets with the objective of providing long-term capital appreciation towards meeting your long-term financial needs such as retirement or a child' s education.