What is Mutual Funds?

A Mutual Fund brings together a large number of investors, who pool their resources to invest collectively for their mutual benefit. The money is managed by a fund manager, who is supported by a team of analysts and experts to help him invest the money. A fund could have many objectives such as capital growth, steady income, capital protection, tax saving, etc. Depending on its objectives, the fund manager will allocate money to different financial instruments such as equity and debt.

Mutual Fund Investments - How do they work?

Each investor is allotted units proportionally on the basis of their contribution to the fund. Thus, a unit is the fundamental block of a Mutual Fund.

The number of units purchased by the investor is determined by the amount of money that the investor is willing to invest. It is for the same reason that the investor is also known as a Unit Holder. The net return on the investment is calculated after deducting tax and research and administrative expenses. The value of each unit is expressed as Net Asset Value or NAV.

Mutual Funds -- Characteristics

Mutual Funds are ideal for those who are not financially savvy or adept at managing their investments. A Mutual Fund is managed by experts who determine where and how the money will be invested. As such, MFs help investors build their financial wealth slowly and steadily.

  • Diverse options: Mutual Funds offer investors a wide range of options, spanning the entire risk-return profile. Investors may choose a Mutual Fund that meets their specific objectives.
  • Long-term wealth: Mutual Funds help investors create long-term wealth by investing small amounts regularly (through systematic investment plans or SIPs). Over the long-term, SIP investments in Mutual Funds deliver good returns while lowering the risk.
  • Easy to invest: Investors can choose to invest in Mutual Funds online or offline. They can invest in a lump sum or small amounts at a time. They can instruct their banks and automate their Mutual Fund investments..
  • Easy to track: You can easily track your mutual portfolio online.

You can read more about the benefits of Mutual Funds here.

Looking to apply for a Mutual Fund Investment? Click here to get started now!

* Mutual Funds are subjected to market risks. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.