Mutual Funds
Wealth creation happens with investing small sums of money over a long period of time.
“Compound interest is the eighth wonder of the world. He who understands
it, earns it, he who doesn’t, pays it.”
– Albert Einstein
‘Start Investing as Soon as You start Earning’
About Mutual Funds
- A mutual fund is an investment vehicle that pools money from a large number of different investors. This money is used to purchase a variety of securities including stocks, bonds and other money market instruments.
- When you buy a unit in a mutual fund, you own a small stake in all the investments that are included in the fund..
- An individual as a single investor is likely to have lesser amount of money at disposal than say, a group of friends put together. Now, let's assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them.
- The asset management company invests the investors' money on their behalf into various assets towards a common investment objective.
- All mutual funds are registered with SEBI (Securities Exchange Board of India) and therefore, well regulated.
- There are over 2000 mutual funds from about 39 mutual fund companies at present. However, having limited or no knowledge of it can hamper one's financial goals. Hence one must seek professional advice on the same.
Why Invest In Mutual Funds ?
Managed by Experts
Enables Long-term wealth creation
Well Regulated by SEBI (Securities and Exchange Board of India)
Risk Management – Less Risky than investing directly in stocks and bonds
Gives higher Returns as compared to conventional investment products
Easy Method of Diversification
Hassle free investing (Easy to Buy and Sell)
Less Money Required
Brings Discipline in investing
Investing in various asset classes like Gold, Debt and Equity with the help of mutual funds can help eliminate many drawbacks of investing through other routes
| Asset Classes | |||
| GOLD | DEBT | EQUITY | |
| Routes of investment | Physical Gold/ Gold Bonds | Fixed Deposits/ Corporate Bonds | Direct Equity |
| Drawbacks | Physical Gold - Safety and purity Gold Bonds - Buying limits, lock-in of 5 years, low liquidity | Medium to low liquidity Inefficient taxation Penality for premature withdrawal | Requires time and expertise Relatively Riskier |
| Here's how mutual funds can help you overcome above drawbacks. | |||
| Mutual Fund Route | Gold ETF and Gold Fund | Debt Mutual Fund | Equity Mutual Fund |
| Benefits of investing in mutual funds | Buying limits - Min. 1 unit through stock exchange and no upperlimit High liquidity No lock-in | Potential for higher inflation-adjusted returns Different schemes for different investment horizon High liquidity Tax efficient returns | Professional management Diversification/robust risk management High liquidity Less risky than directly investing in stocks |
