Mutual fund is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds and securities. Each investor owns units, which represent a portion of the holdings of the fund. The income generated from this collective investment is distributed proportionally among investors, making it one of the most viable investment options among common man.Instead of deciding which stock or bond to buy, you just give your money over to a Mutual Fund manager who takes it and decides on which stocks or bonds to invest in for you. The fund manager is qualified with respect to education and experience in mutual fund investment. It is similar to outsourcing a particular job to a professional.
A fund manager takes care of it all and makes decisions on what to do with your investment. He/she decides whether to invest in equities or debt. He/she also decide on whether to hold them or not and for how long. Even when you are sleeping, these fund manages are watching, monitoring and making adjustments to reach your financial objective. They keep a watch on your fund, just the way a mother looks after you.
No prior knowledge required
Mutual fund is favoured because it doesn’t require the investor to do the research and asset allocation. The expert fund manager takes care to allocate you resources in such a manner that you meet your financial goals.
Suit your financial goals
No matter what your income is, you must make it a habit to set aside some amount (however small) towards investments. It is easy to find a mutual fund that matches your income, expenditures, investment goals and risk appetite.
There is a general notion that mutual funds are not as safe as bank products. This is a myth as fund houses are strictly under the purview of statutory government bodies like SEBI and AMFI. One can easily verify the credentials of the fund house and the asset manager from SEBI. They also have an impartial grievance redressal platform that works in the interest of investors.