Mutual
Funds are financial instruments. These funds are
collective investments which gather money from
different investors to invest in stocks, short-term
money market financial instruments, bonds and other
securities and distribute the proceeds as dividends.
The Mutual Funds in India are handled by Fund
Managers, also referred as the portfolio managers.
The Securities Exchange Board of India regulates the
Mutual Funds in India. The unit value of the Mutual
Funds in India is known as net asset value per share
(NAV). The NAV is calculated on the total amount of
the Mutual Funds in India, by dividing it with the
number of units issued and outstanding units on
daily basis.
Benefits
of Investing in Mutual Funds
Any one who is aware of stock market is not new to
mutual funds. Mutual funds have gained in popularity
with the investing public especially in the last two
decades.
Following are some of the primary benefits.
1.
Professional Financial Experts
Every Mutual Fund scheme has a well-defined
objective and behind every scheme, there is a
dedicated team of financial experts working in
tandem with specialized investment research team.
These experts diligently and judiciously study
companies, their products and performance, and after
thorough analysis, they decide on the best
investment option most aptly suited to achieve the
schemes objective as well as investors financial
goals.
2. Diversifying Risk
It plays a very big part in the success of any
portfolio. Mutual funds invest in a broad range of
securities. This limits investment risk by reducing
the effect of a possible decline in the value of any
one security. Mutual fund unit-holders can benefit
from diversification techniques usually available
only to investors wealthy enough to buy significant
positions in a wide variety of securities.
3. Low Cost
Mutual Funds generally provide an opportunity to
invest with fewer funds as compared to other avenues
in the capital market. You can invest in a mutual
fund with as little as Rs. 5,000 and also have the
option of investing a little of Rs.500 every month
in a SIP or Systematic Investment Plan.
4. Liquidity
You can encash your money from a mutual fund on
immediate basis when compared with other forms of
savings like the public provident fund or National
Savings Scheme. You can withdraw or redeem money at
the Net Asset Value related prices in the open-end
schemes. In closed-end schemes, lock in period is
mentioned, investor cannot redeem his investment
until that period.
5. Variety of
Investment
There is no shortage of variety when investing in
mutual funds. There are funds that focus on
blue-chip stocks, technology stocks, bonds or a mix
of stocks and bonds and with due assistance from a
financial expert, the investor can choose a scheme
that aptly fits his requirements, and helps him
achieve maximum profitability.
