Mutual Fund
What is Mutual Fund?
Mutual Funds are professionally managed investment tool where individual investors can put their money to grow under diversified portfolio of stocks, bonds and other securities. Unlikely, investment in stocks where it requires knowledge, skill and time, in mutual fund one can invest without having particular skills of investment in market as those were been taken care by fund managers. The average return of investment in mutual fund has always proved to be the best investment tool for asset building and beating inflation. Major Categories of mutual fund includes equity [stocks], debts [fixed income], hybrid [mixed] and money market funds.
One can invest in mutual fund in recurring form which is termed as Systematic Investment Plan [SIP]. The minimum investment in SIP starts from ₹500/- only. Another form of investment in mutual fund is lump sum investment or single investment like bank FDs. Lump sum investment in mutual fund starts from ₹5000/-. The return of investment in mutual fund depends on the fund performance of the portfolio.
Key Aspects of Mutual Fund
- Professional Management: Fund Managers conduct research and make investment decisions to achieve fund objectives.
- Diversification: Investments in mutual funds are spread across various asset classes and sectors which significantly reduces the risk of capital loss compared to investment in single stock.
- Liquidity: Investors can easily buy or sell [redeem] on business days offering high flexibility.
- Affordability: One can start investing in SIP with only ₹500/- in frequency like monthly and daily/weekly.
- Tax Benefit :Certain schemes like Equity Linked Savings Scheme [ELSS] provides tax benefit under section 80C
- Transparency: Mutual Funds provide transparency as they are regulated by Securities and Exchange Board of India [SEBI]