Mutual funds for everyone
What Is a Mutual Fund?
A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Features & Benefits
Investing in mutual funds provides several advantages for investors. To name a few, flexibility, diversification, and expert management of money, make mutual funds an ideal investment option.
How do Mutual Funds work?
Basically, mutual funds are pooled investments, managed by professionals who have knowledge about how the market works. It is not just your money alone that gets invested. The common pool of money invested by many investors like you is managed by the mutual fund’s investment manager. The manager then uses sound judgment and market understanding to invest the total amount, called corpus, in different financial securities like shares, debentures, and money market instruments. Profit generated through these investments is then distributed among investors in proportion to the investments made by them.
How do my mutual funds generate profits?
Your mutual fund investments earn returns in any of these three ways:
- Funds receive income in the form of dividends or interest on the securities they own
- When prices of securities increase and a fund sells securities at a higher price, it gains profits
- If a fund holds on to securities after its prices have increased, the Net Asset Value (NAV) of the fund increases and units can then be sold off at a profit.
Why should I consider investing in mutual funds?
Mutual funds are a vital tool to ensure your financial well-being. They help you to get better returns even from relatively smaller investment amounts, and are quite flexible in nature. Whether you want to invest a small amount at regular intervals or a big lumpsum amount at once, you will find a mutual fund product suitable for your needs. With options like SIP (Systematic Investment Plan) and SWP (Systematic Withdrawal Plan), mutual funds can help you plan for short-term as well as long-term goals and financial liabilities.
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