Mutual Fund- A Better way of investing money

Aastha Kochar By Aastha Kochar, 4th Jun 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/188wfioa/
Posted in Wikinut>Writing>Textbook

This page explains about the usefulness of mutual funds as a mode of investment

Mutual Fund Investment

A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
Savings form an important part of the economy of any nation. With savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents multiple avenues to the investors. Though certainly not the best or deepest of markets in the world, it has ignited the growth rate in mutual fund industry to provide reasonable options for an ordinary man to invest his savings.
Investment goals vary from person to person. While somebody wants security, others might give more weight age to returns alone. Somebody else might want to plan for his child’s education while somebody might be saving for the proverbial rainy day or even life after retirement. With objectives defying any range, it is obvious that the products required will vary as well.



Investors earn from a Mutual Fund in three ways:
1. Income is earned from dividends declared by mutual fund schemes from time to time.
2. If the fund sells securities that have increased in price, the fund has a Capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain.
3. If fund holdings increase in price but are not sold by the fund manager, the fund's unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain.
Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard investors’ interest, ensures that the investors are not cheated out of their hard-earned money. All in all, benefits provided by them cut across the boundaries of investor category and thus create for them, a universal appeal.

Tags

Investing, Investment, Investment Strategy, Long Term, Money, Mutual Funds

Meet the author

author avatar Aastha Kochar
Being a researcher by qualification and a writer by passion, I blend ideas and facts to come up with a fantastic creation. I love surfing internet, clicking pictures, and sharing my feelings

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Comments

author avatar Ptrikha
8th Apr 2015 (#)

Another great overview!

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