Layman in Mutual Funds? Read this.

By Ashish Kyal -

Today there are a number of investment options available for an investor through which an individual can generate good profit and fulfil their future goals. One of such investment option is Mutual funds.

Now the question arises What is Mutual fund? Basically, it is a group which pools together the capital of various investors and makes investment into various asset classes. It is managed by professional fund managers. So lack of knowledge to the investor will also not be a concern. The different asset classes in which the fund manager parks the money of the investors are Equity, Debt, Money market, other mutual fund scheme etc.

Now the question arises, why one should invest in Mutual fund rather than investing in Shares, Debt fund or Fixed deposit. The answer for this is explained below.

Professionally managed funds: This is a most important benefit that an investor gets when he/she invests in a mutual fund scheme. The fund invested by the investor is professionally managed.

  • Diversification of the funds: The another reason why an investor should prefer Mutual funds over shares is that the funds which are invested in mutual fund is diversified in different sector, different shares and different assets class.
  • Less Risky: The funds are diversified and professionally managed by the fund managers these makes investment in Mutual fund less risky than investment in equity.
  • Amount of Investment: One can start his investment with a small amount say 500 Rs and there is no discrimination in mutual fund whether you invest Rs.500 or Rs.50,000 the fund managers will manage your capital in the similar way as they manage the money of the large investor.
  • Different Schemes: Mutual fund provides different schemes to invest according to their risk capacity. For example an investor who as the capacity to take more risk can invest in equity scheme whereas the investor who wants to take less risk can invest in debt scheme. But one should remember “Higher the risk, higher the returns”.
  • Liquidity: In open ended scheme an individual can buy and sell mutual funds units whenever he/she wants to do so. On withdrawal within one year exit load is charged around 1%.
  • Tax Saving: Mutual funds can be used as an instrument for saving tax under section 80-c upto 1,50,000. The minimum holding should be for 1 year to save tax. If units are redeemed (sold) before one year the investor will be liable to pay tax on his/her investment.

 

So these are the basic advantages and reasons why an individual can prefer Mutual funds   over other investment options. To fetch more knowledge on the same feel free to reach us – HERE

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