When should one opt for a Mutual Fund

What is Mutual Fund?

Mutual Fund is a SEBI registered entity that collects money from individuals or corporate investors and invests the collected fund in a variety of financial instruments such as equity, bonds, debentures etc.

Mutual funds issue units to the investors and the appreciation of the mutual fund’s portfolio leads to an appreciation in the value of the units held by investors. There are many mutual funds for each AMCs and each of this Mutual Fund has definite investment objectives as mentioned in its prospectus so investors with common investment principles choose to invest in a fund. This mutual fund is managed by a Fund Manager who is considered to be expert in this area. These fund managers also charge huge fees for managing the money. Typically mutual fund charges entry load of up to 2.25% and this sum goes to broker. However, you can avoid paying entry load by directly investing with AMCs. Some AMCs even allow online investing.

We have many varieties of mutual funds. Variety may vary in terms of open ended or close ended funds, equity or debt funds, tax saving or non-tax saving funds, diversified or sector funds etc.

Investors choose Mutual Funds either because they don’t have the time or the expertise to manage their money. No fund manager will tell you when is the right time to exit the fund so you will have to decide based on performance and market information.

We will soon come with best mutual funds to invest in various popular categories. Stay tuned…!