What are mutual funds? - What is a mutual fund? - What are mutual funds in India?
A mutual fund is a pool of money in which money is managed by a team of highly professional fund
managers and analyst. A mutual fund is a nothing but a collection of money from the number of people
and as a whole is managed by experts in finance domain. To give you more detail idea about a mutual
fund let's consider one example. There are "n" numbers of investors who do not have time and
sufficient knowledge or expertise in share market but want to invest in it. Mutual fund company or
Asset Management Company (AMC) comes up with a plan for these investors in which AMC will collect
fund from individual investor and on behalf of them it will invest in share market, money market,
corporate or government bonds etc. To manage this money AMC appoints a team of experts in the
financial domain and advisory who will make sure that this money is distributed across different
stocks and other investment vehicles and will gain profits. Some part of this profit is then divided
amongst the investors equally and the remaining part is taken by mutual fund or asset management
company (AMC) on account of expenses, levies, and fees. The fees charged by mutual funds are
regulated and are subject to certain limits specified by the Securities and Exchange Board of India
(SEBI). The profit earned is distributed to
investors with various direct or indirect ways such as declaring dividends known as Mutual
fund schemes under dividend plan (D) and growth to mutual fund Net Asset Value or NAV known as
Mutual fund schemes under Growth
plan (G) .
What are the main advantages and highlights of Mutual funds?
Benefits of Investing in Mutual Funds - Advantages of Mutual funds:
- An investor does not need to worry about market research, analysis and any risk associated with
it yet investor can create good wealth over longer the period of time.
- If an investor has less money still he can earn sufficient growth over the period of time.
- Mutual funds offers number of different options to choose from in the financial spectrum. Thus,
plenty of options are available in mutual funds schemes according to investor's need. This
is because mutual fund company or Asset Management Company offers various schemes according
to investors risk capacity, regular income requirements and investment horizons. An individual
investor can set back relaxed and just choose the mutual fund scheme with a little research
by having a glance on historical returns and performance of scheme and as per his own
- There are some options in mutual funds are available which pays you monthly or regular
dividend based on your accumulated units. This, in short, makes good money on regular
- Some mutual fund scheme which comes under the Equity Linked Savings Scheme category (ELSS)
offers tax benefits under section 80C of Income Tax Act. You can read more about
What are ELSS or Equity Linked Savings Scheme?
- An investor can withdraw money any time by selling out the units (Except ELSS which has lock in
period of 3 years). Thus, investor 's money is not blocked and can be used any time
according to needs.
- A mutual fund is a pool of money in which money is managed by a team of highly professional
managers and analyst. A mutual fund is a nothing but a collection of money from the number
and as a whole is managed by experts in finance domain.
- The organization which provides mutual fund schemes and manages everything on behalf
of the individual investor is known as Asset Management Company or AMC. The Asset management
Company appoints portfolio manager or fund manager who has expertise in finance domain and
share market. The fund manager is responsible for distribution and management of the funds
collected from the individual investor.
- Mutual funds are ideal for those investors who either have less money for investment, or for
who neither have the inclination nor the time to research the share market, but want to grow
wealth. The money collected from individual investor by mutual funds is invested by experts
in finance domain also known as fund managers. The investment is done according to the mutual
fund scheme's category and objective.
- The Asset management Company also know as AMC offers the variety of schemes according to
the individual risk capacity or risk profile, regular income requirements, investment time
period, and various types of mutual fund category that comes under regulations of Securities
Board of India (SEBI).