What are mutual funds?
Mutual funds are funds that pool the money of several investors to invest in equity or debt markets. Mutual Funds could be Equity funds, Debt fundsfloating rate debt. or balanced funds. Funds are selected on quantitative parameters like volatility, FAMA Model, risk adjusted returns, and rolling return coupled with a qualitative analysis of fund performance and investment styles through regular interactions / due diligence processes with fund managers.
The reason that mutual funds are so popular is that they offer the ability to easily invest in increasingly more complicated financial markets. A large part of the success of mutual funds is also the advantages they offer in terms of diversification, professional management and liquidity.
Advantages of Investing into a Mutual Fund
- Flexibility: Mutual Fund investments offer you a lot of flexibility with features such as systematic investment plans, systematic withdrawal plans & dividend reinvestment.
- Affordability: They are available in units so this makes it very affordable. Because of the large corpus, even a small investor can benefit from its investment strategy.
- Liquidity In open ended schemes, you have the option of withdrawing or redeeming your money at any point of time at the current NAV
- Diversification Risk is lowered with Mutual Funds as they invest across different industries & stocks.
- Professional Management: Expert Fund Managers of the Mutual Fund analyze all options based on experience & research
- Potential of return: The fund managers who take care of your Mutual Fund have access to information and statistics from leading economists and analysts around the world. Because of this, they are in a better position than individual investors to identify opportunities for your investments to flourish.
- Low Costs: The benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.
- Regulated for investor protection: The Mutual Funds sector is regulated to safeguard the investor’s interests.