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  • Is Mutual Fund Good to Invest ?
  • In a nutshell, mutual funds are safe. Investors should not be worried about short-term fluctuations in the returns while investing in them. You should choose the right mutual fund, which is sync with your investment goal and invest with a long-term horizon.
  • Advantages of mutual funds:
  • Why you should consider Mutual Fund?
  • Types of Mutual Fund
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What is Mutual Funds ?

A mutual fund is a kind of investment that uses money from investors to invest in stocks, bonds or other types of investment. A fund manager (or “portfolio manager”) decides how to invest the money, and for this he is paid a fee, which comes from the money in the fund.

Why you should consider Mutual Fund?

When you buy a Mutual Fund, you buy a collection of what that Mutual Fund has invested. Diversification means the Mutual Fund has spread out your money over different companies and/or different types of assets. Your money is invested in a mixture of products with high and low risk to both helps it grow and also protects it.

For example: Large Cap funds diversify by investing in equity shares of different companies which have large market capitalization and are very well established. A hybrid fund diversifies by investing in a mix of stocks and bonds.

You can get started with investing in most Mutual Funds with as little as Rs 100.

Mutual fund managers and analysts wake up each morning with one goal – to research, analyze and study current and potential holdings for their mutual fund. And your investment advisor studies and evaluates mutual fund managers to pick the best funds to help you meet your goals.

Buying stocks and bonds costs you more (set up of a DEMAT account/ transaction fee etc). Because they manage large amounts of money on behalf of lakhs of individual investors, mutual funds are able to take advantage to reduce transaction costs. (You can start your investments without paying a fee)

SIPs make it simple to invest regularly in a mutual fund with as little as Rs 100 a month. Once you register your bank mandate with an online platform, just set up a SIP with any amount you are comfortable with on any date of the month in a Mutual Fund of your choice. The money is automatically debited a day or two before that day every month and invested in that scheme so your investment habit gets regularized

The investments that a Mutual Fund makes are publicly available every month, so if needed, you can see what your fund manager is doing.

Because your money is spread across so many stocks and bonds, you can sell your mutual funds at any time to meet your financial needs. The money hits your bank account within 2 working days. There are Mutual Funds that do this even faster called Instant Redemption Funds. Your money comes back into your bank account within 60 seconds of selling an Instant Redemption Fund.

A mutual fund can offer a simple and efficient way to invest for your life goals – whether retirement, education, buying a home, or just generally making sure your money grows.

Advantages of mutual funds:

A Diversified Portfolio: Mutual funds invest in two main asset classes — debt and equity.

There’s a Fund for Everyone:
Benefit from High Liquidity:
Invest in a Lumpsum or through a SIP:
You can Invest in Small Amounts:
Cost-Efficient:
Reduce your Tax Liability:

Types of Mutual Fund

These funds invest in short-term fixed income securities such as government bonds, treasury bills, bankers’ acceptances, commercial paper and certificates of deposit. They are generally a safer investment, but with a lower potential return then other types of mutual funds.

These funds buy investments that pay a fixed rate of return like government bonds, investment-grade corporate bonds and high-yield corporate bonds. They aim to have money coming into the fund on a regular basis, mostly through interest that the fund earns. High-yield corporate bond funds are generally riskier than funds that hold government and investment-grade bonds.

These funds invest in stocks. These funds aim to grow faster than money market or fixed income funds, so there is usually a higher risk that you could lose money. You can choose from different types of equity funds including those that specialize in growth stocks (which don’t usually pay dividends), income funds (which hold stocks that pay large dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.

These funds invest in a mix of equities and fixed income securities. They try to balance the aim of achieving higher returns against the risk of losing money. Most of these funds follow a formula to split money among the different types of investments. They tend to have more risk than fixed income funds, but less risk than pure equity funds. Aggressive funds hold more equities and fewer bonds, while conservative funds hold fewer equities relative to bonds.

These funds aim to track the performance of a specific index such as the S&P/TSX Composite Index. The value of the mutual fund will go up or down as the index goes up or down. Index funds typically have lower costs than actively managed mutual funds because the portfolio manager doesn’t have to do as much research or make as many investment decisions.

These funds focus on specialized mandates such as real estate, commodities or socially responsible investing. For example, a socially responsible fund may invest in companies that support environmental stewardship, human rights and diversity, and may avoid companies involved in alcohol, tobacco, gambling, weapons and the military.

These funds invest in other funds. Similar to balanced funds, they try to make asset allocation and diversification easier for the investor. The MER for fund-of-funds tend to be higher than stand-alone mutual funds.Before you invest, understand the fund’s investment goals and make sure you are comfortable with the level of risk. Even if two funds are of the same type, their risk and return characteristics may not be identical. Learn more about how mutual funds work. You may also want to speak with a financial advisor to help you decide which types of funds best meet your needs.

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