Mutual fund is considered to be best for anyone to start with who do not know much about the stock market and don’t want to loose the money in early stages of one’s investment journey.
Mutual fund company also known as Asset Management Company(AMC) pools money from the people who doesn’t have huge money in investing in the companies/stocks or who want to invest in small amount even with ₹100.
They invest the pooled money in different companies/stocks in various proportions so that the risk is minimized by investing in various stocks.
If we invest in single stock/company there is a chance of very low returns or losing the whole money if the company doesn’t perform well or shuts down.
Mutual Funds not only invest in stocks but also in various Government bonds or Private bonds of short term or long term and also in debt to offer various diversified options to investors.
In a nutshell, Mutual Funds are safe and getting started instrument for everyone for long time wealth creation.
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Advantages of Mutual Funds:
- Professional Management: Mutual Funds are managed by professional fund managers. They do continuous research and monitor the performance of the fund
- Diversification: Mutual Funds act as diversified investment option by investing in various companies and industries thus minimizing risk of investing in a single company.
- Affordable: Mutual Funds can be purchased even with ₹100 thus providing affordable investment option to everyone.
- Liquidity: One can purchase and withdraw from mutual funds anytime thus providing liquidity benefit.
Don’t put all your eggs in one basket
There are many types of funds offered by Mutual Fund companies according to objectives or goals of one’s risk taking capacity and also duration of investment. Here is the broader classification of Mutual Funds.
- Equity Funds
- Money Market Funds
- Debt Funds
- Sectoral Funds
- Hybrid Funds etc.,
Depending upon the financial goals a Financial Advisor will recommend any one type of this funds or mix of the funds for the clients in meeting their goals within specified period of time.
Here is just a brief understanding about Mutual Funds, I will be covering this in-depth and also provide you a best fund selection criteria to invest in Mutual Funds. Hope you like this article and please do follow my website and share this article to your friends and family! 👍
