Mutual Fund is a type of investment platform in which different stocks , bonds or other securities come together to form a group of funds ,hence the name “Mutual Funds” .
Let’s understand Mutual Funds with an example :-
We all know few technology stocks like Google , Meta etc . You can buy these stocks individually and bear the profit or loss depending upon the business growth or market fluctuations . On the other hand when a company assembles different technology stocks and form a single investment fund , thats called Mutual Funds .
Benefits of Investing in Mutual Funds :-
- The most outstanding benefit of investing in Mutual Fund is lesser risk factor as compared to investing in individual stocks as the performance of a particular Mutual Fund depends on all the stocks forming the group , rather than focusing on ups and downs of one particular stock.
- You can start with as minimum as Rs 500 to start investing in Mutual Funds .
- Mutual funds give small or individual investors an option to diversified, professionally managed portfolios.
- Mutual funds are highly liquid investments which means you can buy and sell them as per your will .
- Mutual Funds does not require an investor to do any type of technical or fundamental analysis of stocks as it is done by highly skilled fund managers who operates the buying and selling of stocks forming the group.
- Mutual Funds provide investors with huge variety of investment options like stocks , bonds , commodities , foreign assets and real estate .
How to invest in Mutual Funds ?
So there are two ways of investing in Mutual Funds i.e SIP ( Systematic Investment Plan ) and lump sum . An investor is not allowed to day trade in Mutual Funds as compared to stock market where you can buy and sell a particular stock n number of times in a single day .
What is SIP?
Systematic Investment Plan a.k.a SIP is a facility offered by Mutual Funds to the investors to invest in disciplined manner . SIP allows an investor to invest a definite amount in a selected Mutual Fund in a weekly / monthly / half yearly or yearly basis . SIP is a game of patience and compounding , an investor has to be in the game of investing for a very long time to savour the fruits of compounding .
What is Lump Sum ?
When an investor invests a bulk amount in a Mutual Fund one time , rather than investing a part of the bulk amount in intervals as weekly/monthly/ yearly basis etc is called lump sum . The only drawback in lump sum is that an investor may miss out a booming market due to lack of funds and that can affect his eventual returns .
