Mutual funds are regarded as the investment which is made through the deposits of several investors who invest money in stocks, bonds, and other money market instruments. Professional money managers allocate the funds' investments and try to produce capital gains. The prerequisite need for an investor to attain an effective mutual fund's portfolio is to strengthen its structure so that it matches the stated investment objectives.
The most adept thing about mutual funds is that it offers individual investor access to professionally created portfolios of equities, bonds, and other securities. It also allowed the shareholders to willingly participate in the gains and losses of the funds. These funds can be easily redeemed as per the requirement of Net Asset Value (NAV). For deriving the NAV of any fund, the financial analysts divide the total value of the securities given in the portfolio by the total number of exceeding shares.
1. Higher Returns: Mutual funds in India are one of the highest return generating instruments when compared to traditional sources like a fixed deposit or a PPF. Equity mutual funds give and average return of 12-15%, which is significantly higher when compared to other options.
2. Liquidity : Mutual funds are extremely liquid and can be bought and sold anytime. Though there are some lock in funds like ELSS which have a lock in of 3 years but most of the open ended funds are very liquid and useful for investors who require liquidity in their investments.
3. Professional Management : Mutual funds are a pool of money managed by financial professionals who have the appropriate qualification and skills to guide your money effectively. Investing your excess capital on your own without any prior experience or knowledge can be very risky, here mutual funds are a much better option for individuals who do not have direct access to investing knowledge and skills.
4. Cost effective : Investing in a mutual fund is extremely cheap, as the companies now are trying to focus on volume rather than significance, the costs like management fees or exit loads are relatively lower and much more affordable.
5. Can start small : Mutual funds usually have a minimum investment amount as low as Rs 500. This enables everyone to participate in the mutual funds. An individual who is new to the stock market can start small get a taste of how it works and if it is suitable for his purpose and requirements and then gradually increase his/her investments.
To sum up, mutual funds are one of the most well thought of investment methods and for anyone who has some idle cash lying around h/she should definitely consider mutual funds as probable investment.
To know more about mutual funds and invest in them please visit begininvest.com