MUTUAL FUNDS

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Mutual Fund is a vehicle that enables a collective group of individuals to:

  • Provide security to your family
  • Protect your home mortgage, loans, credit card borrowings etc.
  • Provide finance to your loved ones to achieve their goals in your absence
  • Ensure that your family is able to maintain their lifestyle, no matter what happens
  • Please Take care of your estate planning needs
  • Look at other retirement saving/investment vehicles

Investing in a mutual fund is like an investment made by a collective. An individual as a single investor is likely to have lesser amount of money at disposal than say, a group of friends put together. Now, let’s assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them. This is what a professional Asset Management Company does for mutual funds. The AMC invests the investors’ money on their behalf into various assets towards a common investment objective.

Hence, technically speaking, a mutual fund is an investment vehicle which pools investors’ money and invests the same for and on behalf of investors into stocks, bonds, money market instruments and other assets. The money is received by the AMC with a promise that it will be invested in a particular manner by professional managers (commonly known as fund managers). The fund managers are expected to honour this promise. The SEBI and the Board of Trustees ensure that this actually happens.

Why should you Invest in Mutual Funds?

Convenience

Investing in mutual funds is very convenient. With a lot less paper-work and market-monitoring, you can get exposure to a broad-based market and investment as per your requirement. Moreover, the facility of switching between funds and portfolio rebalancing helps to keep your returns in line with expectations.

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Low initial investment

With as low as Rs 500, you can get access to a diversified mutual fund portfolio. Moreover, you get the flexibility to invest via a lump sum or a systematic investment plan (SIP). As compared to a lump sum, an SIP is a good way to lower the overall cost of investment and enjoy the power of compounding.

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Tax-saving

Section 80C provides tax deductions on certain financial instruments and mutual fund is one of them. Equity Linked Savings Scheme (ELSS) has become a popular tax-saving option for Indians in the last few years, owing to its higher returns and the shortest lock-in period of 3 years.

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Professional fund management

In mutual fund investing, your money is managed by a professional fund manager who is backed by a team of researchers. He formulates the investment strategy to do the asset allocation. He gets real-time access to the financial environment and adjusts your mutual fund portfolio accordingly.

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