Basics of Mutual funds
It is a professionally managed investment fund that pools in money from investors to invest in markets and securities in line with the objectives agreed upon with the investor. The mutual fund investors are issued units of the schemes. Investment gains or losses made by the mutual fund schemes are shared by the investors in proportion to their investment in the fund after paying the expenses and fee.
Advantages of Mutual funds
Low Cost - Mutual funds offers affordable investment option for people who do not want to make a large investment. Investors benefit as the cost related to managing the fund are spread across all the investors in propotion to their investment.
Increased diversification – Since mutual funds invest in a broad range of securities, the risk of falling value of investment is reduced. Even when one of the companies in its portfolio doesn’t perform well, the returns are set off against other investments in the portfolio.
Liquidity – Most mutual funds can be redeemed at any time and the investor receives the amount in a few days. However few mutual fund schemes have a minimum lock in period. When you are looking for liquidity, invest in funds that offers no exit load.
Convenience and comfort – Once an investment is done in mutual fund, subsequent investment becomes very easy with very little documentation making it convenient and comfortable for the investor
Professionally Managed – Qualified and Professional Fund managers manage the funds. They frequently monitor the investment in the interest of the investors manage the funds.
Regulated – Mutual fund market is regulated by Securities and Exchange board of India with stringent rules and checks on mutual funds and its activities.