Mutual Fund – A great investment opportunity

The two prominent questions that come in every investor’s mind are: What is a mutual fund? & What are the benefits of investing in a mutual fund?

A mutual fund is a collective investment tool that pools together money from many investors. A professional fund manager will carry out in-depth research and park these funds in different asset classes to optimise your investments. Mutual funds allow an individual investor to take part in the stock market without having to monitor the market movements regularly.

The fund manager takes your money and invests in a wide range of stocks, fixed income investments, or debt. Fund managers use the popular and effective technique of diversification to counter market fluctuations while minimizing market risks. Therefore, if a particular stock in a portfolio does not do well at a given point of time, there is a possibility that the loss is balanced or minimized due to a better performing stock in the same portfolio.

Once you have invested your money in a mutual fund, you will be provided with units in the fund based on the amount you have invested. The price of each unit is called NAV (or Net Asset Value). NAV represents the value of one unit of your investment in a mutual fund after paying all the fund management fees. NAV multiplied by the number of units gives you the value of your investment in a mutual fund. You can invest in a mutual fund in lump sum or through enrolling for SIP.

Following are the benefits of investing in a mutual fund:

  • Professional management of your investment portfolio 
  • Increased diversification of your portfolio 
  • High levels of liquidity  
  • Ability to participate in investments that may be available only to larger or institutional investors

As your financial requirements are likely to grow over time, even though if your income may grow at a steady pace, inflation will take its toll. Traditional forms of investments such as bank FDs, gold, or bank savings may not help you realize your financial dreams and life goals. Therefore, the million-dollar question that you now need to ask yourself is how will you achieve your dream of buying a car, own home, or special vacation? There seems to be only one answer – Mutual Funds.

However, you must always remember that mutual fund investments are subject to market risks. To know which kind of Mutual Fund schemes are suitable for you, you can use ' Looking for Expert Advice? ' section of Investmentz.com

Happy Investing!


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