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Are you in search of a finer & better investment avenue that would help you to get good returns rather than just earning your bread and butter? If this description fits you, then expand your horizon of thoughts to Mutual fund investments which will not only give you good returns as compared to your normal fixed deposits in banks but also is the most preferred & suitable investment choice of a common man from plenty of investment options available. Always remember that prudent investment decisions will grow your wealth which in turn will help in fulfilling your financial goals & needs. So always plan your investment decisions smartly and wisely.

Mutual Funds – What Are They?

Mutual fund is nothing but a financial intermediary wherein a common pool of savings is created by a number of investors with predetermined investment objectives & is an ideal investment product for an individual investor. Putting simply, it is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments may be in shares, debt securities, money market securities or a combination of these. This money is then invested by the fund/investment manager according to the objective of the scheme. The several ways to invest in mutual funds help people to customize their investment portfolio according to their need.

Today there is growing awareness of the benefits offered by products like equities and especially mutual funds. More and more people are getting familiar with mutual funds and are willing to invest. Thus they have been recognized as one of the most important and ideal investment avenues for a majority of investors.

So after paying grocery bills, home loan installments, tuition fees and the likes, you have managed to save some pennies & made up your mind to invest in mutual funds, the next confusion that will rule your day will be what are the different mutual fund schemes available, which scheme is right for you & what are their investment objectives? For that, let me ask you a question? Have you ever walked down the super store lately in your vicinity? If yes, then today, you will find that there are more brands of each item - and more varieties of each brand - than ever before. In that case, it becomes difficult for you to make sure what you really want, but if you make a bad selection, you are only out a few rupees. Same is the case with mutual funds. They also come with a number of different schemes with different investment objectives that are launched from time to time like schemes according to maturity period, schemes according to investment objectives, special schemes etc. Your pile of investment will only grow when you will invest in the right fund taking into account your investment objectives.

Before investing in mutual funds, you should always do your homework by performing a comparative study of funds. It is always important to study about the returns given by various mutual funds offered by AMCs. Remember, every problem has several researches involved in it, each backed by the study. All you need to do is select a fund that satisfies your financial needs & goals, and then let the fund/investment manger do his job. The Fund/Investment manager in co-ordination with the research team makes informed & wise decisions about what equity or debt security to buy, hold or sell and at what point of time. What more you can ask for when your investment is being managed by the person who is an expert at it?

Picking the Right Fund:-

The starting point of investments in mutual funds is to define the purpose of investing. You should clearly decide the purpose of your investment decision. There are plethora of schemes available in the market that cater to meet the personal financial obligations such as children's education, marriage, retirement etc. Next important thing is the time horizon of your investment you want to invest for and the risk appetite you have. Thereafter comes the selection of a fund type that best meet your needs i.e. income schemes, liquid schemes, tax saving schemes, equity schemes & the list goes on and on. Now the entire gamut of fund options are available to you & you can then choose the particular fund that you find is best for you.

Always give some thought process while choosing mutual funds before investing. Find out what to consider and what research to do before choosing a fund. You can choose the fund on various factors but essentially these can be the following that you should look into:-

  • Define your Investment objectives & time horizon.
  • Choose your fund by the track record of scheme's performance over time.
  • Always look for the right funds that will help your pile of investment to grow.
  • Take a look at the fund companies i.e. Origin of the Mutual Fund.
  • Look at the degree of transparency as reflected in frequency and quality of their communications.
  • Analyze your risk appetite.
  • Select funds that are consistent in giving returns.

Thus if chosen carefully, mutual funds can help create and grow wealth for years to come.

Why Invest in Mutual Funds?

If investing is a new activity for you, you may be confused as where to invest, how to invest & when to invest. In all these confusions, you may wonder why you should consider investing in mutual funds. Here I give you some of the reasons that go strongly in favor of mutual funds:-

  • Professional Management
  • Ease of Selection
  • Diversification
  • Liquidity
  • Simplicity
  • Tax Advantage
  • Transparency
  • Well Regulated
  • Wider Choices
  • Economies of Scale
  • Rupee-cost averaging

An old saying, “Don't put all your eggs in one basket” holds very much true for mutual funds as their biggest advantage is diversification which says that distributing your money across different types of investments will reduce your risk enormously up to a certain extent.

Thus we can conclude that mutual funds offer a simple and efficient solution for investing thereby allowing investors to meet their financial goals. But investing in mutual fund is not merely giving the check and signing an application form; it also requires continuous monitoring of funds from time to time.

So whenever you plan investments in mutual funds, you will need the advice and guidance to help you reach your investment goals. In that case, consider seeking an advice from experts and consultants/distributors of mutual funds who will help you move closer to funding the dreams of your life.


Mutual funds

Mutual funds in India |

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