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Benefits of Mutual Funds

Mutual Funds are professionally managed type of collective investment schemes that pool money from many investors and invest the same in stocks, bonds, short-term money market instruments and other securities.

Mutual funds seek to mobilize money from all possible investors. Various investors have different investment preferences. In order to accommodate these preferences, mutual funds mobilize different pools of money. Each such pool of money is called a mutual fund scheme.

Every scheme has a pre-announced investment objective. When investors invest in a mutual fund scheme, they are effectively buying into its investment objective.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common investment objective. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy.

The money thus collected is then invested by the fund manager in different types of securities These could range from shares to debentures to money market instruments, depending upon the scheme's stated objectives. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

Mutual Fund Operation Flow Chart
Benefits of Mutual Funds
Advantages of Mutual Funds
Managed by Professionals

You avail of the services of experienced and skilled Professionals who are backed by a dedicated investment research team, which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a wide range of securities. This diversification reduces the risk by limiting the effect of a possible decline in the value of any one security. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Wide array of choices

Mutual funds offer a variety of schemes that will suit your needs over a lifetime. When you enter a new stage in your life, all you need to do is sit down with your financial advisor who will help you to rearrange your portfolio to suit your altered lifestyle

Affordable investment

As a small investor, you may find that it is not possible to buy shares of larger corporations. Mutual funds allow you to make an investment, even if you have a very small amount to invest. This advantage makes it more attractive among investors. You can invest with a minimum of Rs.1000 in a Systematic Investment Plan on a regular basis.

Return Potential

Mutual funds have a proven track record of generating superior returns over a long term in comparison to other asset classes.

Liquidity

In open-ended mutual funds, you can redeem all or part of your units any time you wish. Some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period. However from most of the schemes, you can get back your money within 4 working days.

Transparency

The performance of a mutual fund is reviewed by various publications and rating agencies, making it easy for investors to compare fund to another. You get regular information on the value of your investment in addition to disclosure on the stock/bond - specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.