What are Mutual Funds?
A mutual fund is an investment vehicle that pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, and other securities. Think of it as a basket where many people contribute their money, and an expert fund manager invests this collective pool in various assets.
Key Concept
Instead of buying individual stocks or bonds yourself, you invest in a mutual fund that owns a diversified collection of assets managed by professionals.
Why Mutual Funds?
Mutual funds offer several advantages that make them an attractive investment option for both beginners and experienced investors:
Low Entry Barrier
Start investing with as little as ₹500 per month through SIP
Professional Management
Expert fund managers make investment decisions on your behalf
Diversification
Your money is spread across multiple securities, reducing risk
Tax Benefits
ELSS funds offer tax deductions under Section 80C
How Mutual Funds Work
When you invest in a mutual fund, you're buying units of the fund. The price of each unit is called the Net Asset Value (NAV), which is calculated daily based on the total value of the fund's holdings divided by the number of units outstanding.
Example:
• You invest ₹5,000 in a mutual fund
• The current NAV is ₹100 per unit
• You receive 50 units (₹5,000 ÷ ₹100)
• If the NAV grows to ₹120, your investment is now worth ₹6,000
Types of Mutual Funds
Mutual funds come in various types to suit different investment goals and risk appetites:
- check_circle Equity Funds: Invest primarily in stocks. Higher risk but potential for higher returns over the long term.
- check_circle Debt Funds: Invest in bonds and fixed-income securities. Lower risk with moderate returns.
- check_circle Hybrid Funds: Mix of equity and debt. Balanced risk-return profile.
- check_circle ELSS (Tax Saving): Equity funds with tax benefits and a 3-year lock-in period.
Who Should Invest in Mutual Funds?
Mutual funds are suitable for almost everyone who wants to build wealth over time:
- ✓ Young professionals looking to start their investment journey
- ✓ Parents planning for children's education or marriage
- ✓ Individuals saving for retirement
- ✓ Anyone who wants to grow their savings but lacks time to research individual stocks
Ready to Get Started?
At Gainvest, partnered with Prudent Corporate Advisory Services Limited under the Fundzbazar brand, we provide expert guidance to help you choose the right mutual funds for your goals.
Contact Us Today arrow_forwardKey Takeaways
- • Mutual funds pool money from many investors to create a diversified portfolio
- • You can start with as little as ₹500 per month
- • Professional fund managers handle the investment decisions
- • Diversification helps reduce risk compared to individual stock picking
- • Different types of funds suit different goals and risk appetites