Advantages of mutual funds

madugundurukmini By madugundurukmini, 20th Aug 2014 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Business>Investment

A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal.

Investment objective and strategy

Mutual funds
Investing in mutual funds is a rage in the present market scenario. A systematic investment in this instrument is bound to give rich dividends in the long- term. A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. A mutual fund is the most suitable investment for the cautious investor as it offers an opportunity to investing a diversified professionally man aged basket of securities at a relatively low cost. The money collected from the investors is invested by a fund manager in different types of securities. These could range from share and debentures to money market instruments depending upon the scheme's stated objectives. The income earned through these investments and capital appreciation realized by the scheme are shared by its unit holders in proportion to the units owned by them. Anybody with an invest surplus of as little as a few thousand rupees can be invested by buying units of a particular mutual fund scheme that has a defined investment objective and strategy.

React differently to the same economic conditions

Advantages of mutual funds
Diversification- The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. other securities in the portfolio will respond to the same economic conditions by increasing in value. when a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.

Professional management- Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.

Regulatory oversight- Mutual funds are subject to many government regulations that protect investors from fraud.

Liquidity- It's easy to get your money out of a mutual fund. Write a check, make a call, and you have got the cash.

Convenience- You can usually buy mutual fund shares by mail, phone, or over the internet.

Low cost- Mutual Fund expenses are often no more than 1.5 per cent of your investment. Expenses for Index funds are less than that, because Index Funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index- transparently, flexibility, choice of schemes, tax benefits, well regulated.


Advantages, Investment, Mutual Funds

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