WHAT IS MUTUAL FUND?
Mutual funds what is it, the question that most of you have in your mind. It is an investment cycle where many investors to pond the money to earn good returns after a tensed period. This carcass of funds is managed by an investment professional known as a fund manager or portfolio manager. It's the job to invest the money in various securities such as bonds, stocks, gold and other assets and provide some potential returns. The profits or loss on the investment are shared collectively by the investors in proportion to the fund.
Why invest in mutual funds?
- Professional expertise
Without knowledge if you are Investing in financial markets then it will be a big risk factor. It requires the skill of judgements. You have to go through a detail research and analysis for the best options available for you.And the main point is that you have to be patient and get deep in market it a good alternative for investing.Note that without an professional do not invest, have a professional fund manager who takes care of your investments and make hard effects of returns and with just that you have to pay some amount of fees to the management. - Returns
The biggest benefit of investing in mutual fund is that you can earn potentially higher returns than traditional investment options offering assured returns it is because the mutual funds are linked with that how the market is reacting.If the market is on bull then the extra effect will be seen on your value of fund.And if it is a bear then fund values may fluctuate at the downside and impacts the fund on negative side. If your research and invest in funds that can help you meet your financial goals at the right time in life. - Diversification
If you invest only in a single asset, you could risk a loss if the market crashes and you can avoid this problem by investing in any different stock and diversify and enlighten the portfolio. To avoid loss select at least ten stocks of different sectors. It would be lengthy and time consuming process. In case you invest in a mutual fund that tracks the BSE Sensex then you have to access 30 stocks across sectors in a single fund this reduces the risk factor. - Tax benefits
In the market investors claim a tax deduction.This tax benefit is eligible under Section 80C of the Income Tax Act. ELSS funds with the lock period of 3 years You get tax deduction upto Rs. 1.5 lakhs ELSS they are equity linked. It means you can only withdraw the money after the lock period. Some other benefits are debt funds but in traditional products, all interest earned is subject to tax. At instance the debt mutual funds, the returns earned above the cost inflation index will be subjected to tax.
