The idea of a Mutual Fund is to pool the savings of a number of investors with the objective of investing the money thus collected, in capital market securities such as equity stocks, bonds, debentures, and others. The returns of these investments are shared by the investors whose money has been pooled. A Mutual Fund is considered to be the ideal investment option for the common man allowing him to invest in a diversified, professionally managed assortment of securities at a relatively lower cost.
The benefits of investing in mutual funds.
Broad based investment
The importance of broad basing investment is never lost on the best managed mutual funds that have portfolios that are likely to react differently to similar market influences. For instance, some securities in a diversified portfolio could lose value with rising interest rates while some others could gain in value. A well spread out portfolio is an effective buffer against losses resulting from such imbalances.
Professionally managed fund
The fund managers are specially trained and experienced to manage the portfolio assigned to them and they take investment decisions on behalf of the investors.
Stringent regulatory regime
Normally the capital market regulator oversees the functioning of the mutual funds and ensures the optimum safety to the investors’ money.
Liquidity
Buying and selling mutual funds are a simple affair now due to better and more advanced settlement procedures and IT integration and transparency.
Low cost of investment
The cost of investing in mutual funds is around 1.5 percent of the investment made and they are lesser for Index Funds as they are not actively managed.
Convenience
Mutual fund shares could be bought by mail, phone, or over the Internet.
The other benefits of mutual funds relate to transparency, flexibility, choice of schemes tax benefits and a well regulated market.
Mutual funds also have their disadvantages but normally these cannot compare with the advantages that they offer. There is no doubt that for the retail investor mutual funds are the safest way to invest in the capital markets where risk is a way of life.
Inflationary pressure
For the retail investor with small savings the best bet in his struggle to stay ahead of inflation is to look beyond the traditional bank debt securities such as fixed deposits to earn good returns on his investments. With a little more risk and substantially higher returns, investing in mutual funds is the best option for the small investor.
The benefits of investing in mutual funds.
Broad based investment
The importance of broad basing investment is never lost on the best managed mutual funds that have portfolios that are likely to react differently to similar market influences. For instance, some securities in a diversified portfolio could lose value with rising interest rates while some others could gain in value. A well spread out portfolio is an effective buffer against losses resulting from such imbalances.
Professionally managed fund
The fund managers are specially trained and experienced to manage the portfolio assigned to them and they take investment decisions on behalf of the investors.
Stringent regulatory regime
Normally the capital market regulator oversees the functioning of the mutual funds and ensures the optimum safety to the investors’ money.
Buying and selling mutual funds are a simple affair now due to better and more advanced settlement procedures and IT integration and transparency.
Low cost of investment
The cost of investing in mutual funds is around 1.5 percent of the investment made and they are lesser for Index Funds as they are not actively managed.
Convenience
Mutual fund shares could be bought by mail, phone, or over the Internet.
The other benefits of mutual funds relate to transparency, flexibility, choice of schemes tax benefits and a well regulated market.
Mutual funds also have their disadvantages but normally these cannot compare with the advantages that they offer. There is no doubt that for the retail investor mutual funds are the safest way to invest in the capital markets where risk is a way of life.
Inflationary pressure
For the retail investor with small savings the best bet in his struggle to stay ahead of inflation is to look beyond the traditional bank debt securities such as fixed deposits to earn good returns on his investments. With a little more risk and substantially higher returns, investing in mutual funds is the best option for the small investor.
