Let’s start our toady’s discussion with the concept of mutual fund investment. So the definite question will be “what is mutual fund investment?” The answer is --- Mutual Fund is a trust which pools money from individual, group or from the corporate investors and then invests the collection on behalf of the investors in equity shares, Government bonds call money market and distribute the profit among the investors. A mutual fund cannot ignore its objectives at any point of time.
Why should you choose to Invest in Mutual Fund
For a small investor who may not have the ability to analyze the market movement and analyze the viability of stocks or bonds mutual fund can offer him a viable investment option. This is because:
•Mutual Funds provide the benefit of cheap access to stocks that have high value in the market.
•Mutual funds diversify the risk of the investor by investing in different kinds of assets so that the risk of losing investment due to fall in the market comes down.
•Professional fund managers manage them with in-depth research inputs from investment analysts to ensure that your investments are in right hands.
•Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which is almost out of individual’s reach.
Advantages of mutual fund
Diversification of portfolio: Mutual normally invests in diversified portfolio of securities that enables the investors to hold a better diversified portfolio with less risk.
Management: Mutual funds are managed by the professional management and the process undergoes through different research work to ensure higher returns to the investors.
Risk: Investors have diversified portfolio of securities so the risk is less for the investors.
Liquidity: An investor may not be able to sell his shares easily and quickly but mutual fund is more liquid.
Schemes: An investor has different investment schemes with different objectives. Investor has the option to select his scheme as per his affordability and objectives.
Transparency: The management keeps the investors updated with the necessary information whenever required. The required facts are disclosed to investors regarding the market.
Safety: Mutual fund investment is portion of the well regulated investment environment where the investor’s interests are well protected with complete transparency.
Disadvantages of mutual fund
Cost control: Investors have no control over the cost as the investors have to pay the management fees and fund distribution cost as a percentage of the investment value.
Portfolio decision: The port folio is decided by the management and investors do not have the right to decide their portfolio.
Selection of scheme: Many investors find it difficult to choose the option from the various schemes
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