Invest In Mutual Funds

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A mutual fund is an investment vehicle for investing in stocks and bonds. Mutual funds pool money from a large number of investors and invest this money in securities such as stocks, bonds, money markets instruments and similar securities. These funds are managed by professional fund managers, who invest the fund's money in various securities and attempt to produce capital gains for the fund's investors. Every investor has a share in the gains or loss of the fund. Investing in a mutual fund is much easier than buying or selling individual stocks and bonds on your own. Investors can redeem their units when they want.

All mutual funds are registered with SEBI (Securities and Exchange Board of India). SEBI formulates policies and regulates the mutual funds to protect the interests of the investors.

Mutual funds are managed by an AMC (Asset Management Company). An AMC is a company that invests its clients' pooled money into securities such as stocks, bonds, money markets instruments and similar securities that match the declared financial objectives. An AMC may have various types of mutual fund schemes. The AMC hires a professional fund manager, who buys and sells securities for achieving the objectives of the mutual fund scheme.

Following are the benefits of investing in mutual funds:

Professional Money Management

Professional fund managers manage the money collected by a mutual fund. Fund managers monitor the market and economic trends and analyze securities in order to pick good investments for achieving the objectives of the mutual fund scheme.

Small investments

The minimum initial investment for a mutual fund is very low for most funds. You can start investing with as low as Rs. 500 and get the advantage of long-term equity investment. This is the biggest benefit of mutual fund that at a very low cost the investor gets his investment managed by experts.

Diversification

An example of diversification is provided by the proverb "Don't put all your eggs in one basket". A mutual fund invests in various sound stocks or bonds, which help in spreading the risk factor. If a particular sector does not perform well then the loss can be compensated with profits made in other sectors.

Transparency

Mutual funds provide regular updates to the investors such as daily NAVs, as well as information about the current value of the investment and fund manager's strategy to give a picture of how your investments are doing. The performance of a mutual fund is reviewed by various rating agencies, making it easy for investors to compare between different mutual funds.

Safety

All the mutual funds are regulated by the SEBI (Securities and Exchange Board of India). It assures that your investments are managed in a disciplined and regulated manner and are in safe hands.

Liquidity

You can sell your mutual fund units on any business day. Unless they have a pre-specified lock-in period, your money will be available to you anytime. An open-ended fund can be sold at NAV based prices and a close-ended fund can be traded on the stock exchange.

Choice and Variety

The investors can choose funds from a wide range of mutual fund categories and types available to them. This enables the investor to choose what suits him/her best according to his/her risk-bearing capacity and return expectation.