A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.

The profit or loss generated from this collective investment is distributed proportionately amongst the investors after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or NAV. Simply put, the money pooled in by a large number of investors is what makes up a Mutual Fund.

Advantages of Investing in Mutual Funds

Higher returns

On a long term investment in mutual funds can fetch you higher returns than investing in various fixed income products like fixed deposits, bonds, PPF, KVP

Diversification

Mutual funds gives you the option to invest in stocks, debt and other securities. This helps you in diversifying your investment and manage your risk

Tax Savings

Investing in ELSS mutual funds gives you benefit of tax deductions under Sec 80C. It has lock-in period of just three years, the shortest among all tax-saving investments

Affordability

You can invest in mutual with amount as low as Rs 500. This allow investors to enter equity and debt market with much lower sum and gain from the growth in these markets

Ways to Invest in Mutual Funds

SIP(Systematic Investment Plan)

SIP allows you to invest a fixed sum at regular intervals. SIP is one of the most recommended ways to invest in mutual fund schemes as it is convenient. It also helps you average out the cost at which you buy the units of these funds.

Lumpsum

When you make a one-time investment, it is called lumpsum. Lumpsum investments are generally done when people have got a big sum of money like bonuses or payments from a sale of an asset.