A Mutual fund is a company that pool money collected from many investors to invest in securities like stocks bonds and other assets. Mutual funds give small and individual investors to invest and public also invest on this type of fund whose money are used to buy other securities, usually stocks and bonds.
Mutual funds are usually open ended because new investors can join into fund at any time they are willing to join.
HOW DO MUTUAL FUNDS WORK?
Mutual fund investment is simple. It is managed by the asset management company. In this mutual fund company public and many other investors want to invest because here our money are monitor under expertise and experienced fund manager and our portfolio are optimized according to the change in condition.
Here in mutual fund our investment is easy accessible and there is no locking period on this type of investment whenever we are in urgent need of money we are free to withdraw it anytime we want.
TYPES OF MUTUAL FUNDS?
- EQUITY OR GROWTH FUNDS – Equity funds are those mutual funds that primarily invest in stocks. In this type of fund the risk is higher because basically here the funds are invested on shares which in return give a higher return of profit. Those who prefer to take higher risk can invest in this type of fund and basically this is long term investment not
just for only two or three months investment.
- DEBT FUND – This fund is for those people who want to take lower risk and cannot bear a huge loss this in return provides low profit in return. This investment can be of any type short term or long term which is suitable to you. Here the major portions are invested in fixed income like government bonds corporate bonds and fixed deposits.
- BALANCED OR HYBRID FUNDS – This is a mixed type of fund where people carries moderate risk and moderate profit in return. Here people can invest half in equity and half in debt it depends upon them. This investment is also both short and long term investment. This balanced fund is very good investment fund both the equity and debt fund are combined together means major portion are invested combining both of it.
- MONEY MARKET FUND – This type of fund is for those people who want low risk and are happy with low return in profit. Here this is short type of investment which is suitable for all. Here major portion are invested in treasury bills commercial papers and certificate of deposits.
BENEFITS OF MUTUAL FUNDS?
LIQUIDITY- Whenever we want our invested fund its easy to access it any time we want.
LOW COST- Mutual fund is a low cost effective investment avenue. It charges zero commission and only annual fee is charged to us which is negligible in front of this type of benefits provided to us.
GOOD IN RETURN – Mutual fund provides good return on long term investment like equity mutual funds.
Thus ,investing in mutual fund require a nominal amount and it provide us better returns as compared to others fund because they invest on those companies that are driving India forward and we get direct benefits of that companies in long term.