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Mutual Funds are financial
instruments. These funds are collective investments which gather
money from different investors to invest in stocks, short-term
money market financial instruments, bonds and other securities
and distribute the proceeds as dividends. The Mutual Funds in
India are handled by Fund Managers, also referred as the
portfolio managers. The Securities Exchange Board of India
regulates the Mutual Funds in India. The unit value of the
Mutual Funds in India is known as net asset value per share (NAV).
The NAV is calculated on the total amount of the Mutual Funds in
India, by dividing it with the number of units issued and
outstanding units on daily basis.
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Benefits
of Investing in Mutual Funds
Any one who is aware of stock market is not new to mutual funds.
Mutual funds have gained in popularity with the investing public
especially in the last two decades.Following are some of
the primary benefits.
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1.
Professional Financial Experts
Every Mutual Fund scheme has a well-defined objective and behind
every scheme, there is a dedicated team of financial experts
working in tandem with specialized investment research team.
These experts diligently and judiciously study companies, their
products and performance, and after thorough analysis, they
decide on the best investment option most aptly suited to
achieve the schemes objective as well as investors financial
goals.
2. Diversifying Risk
It plays a very big part in the success of any portfolio. Mutual
funds invest in a broad range of securities. This limits
investment risk by reducing the effect of a possible decline in
the value of any one security. Mutual fund unit-holders can
benefit from diversification techniques usually available only
to investors wealthy enough to buy significant positions in a
wide variety of securities.
3. Low Cost
Mutual Funds generally provide an opportunity to invest with
fewer funds as compared to other avenues in the capital market.
You can invest in a mutual fund with as little as Rs. 5,000 and
also have the option of investing a little of Rs.500 every month
in a SIP or Systematic Investment Plan.
4. Liquidity
You can encash your money from a mutual fund on immediate basis
when compared with other forms of savings like the public
provident fund or National Savings Scheme. You can withdraw or
redeem money at the Net Asset Value related prices in the
open-end schemes. In closed-end schemes, lock in period is
mentioned, investor cannot redeem his investment until that
period.
5. Variety of Investment
There is no shortage of variety when investing in mutual funds.
There are funds that focus on blue-chip stocks, technology
stocks, bonds or a mix of stocks and bonds and with due
assistance from a financial expert, the investor can choose a
scheme that aptly fits his requirements, and helps him achieve
maximum profitability. |
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