Group of individuals investing their money together towards stocks, shares, business properties are called mutual funds in basic terms. An investor invests his money into proportionally a larger sector in order to have an equal role in profits or losses. Generally, small-scale business owners do not get the chance to participate in a high sector of trading markets due to the fear of immense loss. But in the case of a mutual fund the same amount is invested by all the companies irrespective of their turnover and the profits or losses are bared equally.
Investors beginning to understand business and the trade market find it challenging and interesting. When an investor invests in the shares of a company, he should understand that he is the owner of shares of the mutual fund and not the shares of that company.
Buying an individual share becomes much risky compared to owning few shares along with hundred other share holders, which reduces market risk.
Investors need not have any knowledge regarding the company's success strategies or ideologies to be successful with the shares of mutual funds, thus it becomes simple for an investor to invest in any company even without having an idea about the company.
A smart investor would never want to put all his money into one company or one type of business, which means he clearly understands the need for segregation of his money into two or three commodities to increase his number of mutual funds.
Though this is a great idea to be at minimal risk, it is not advisable for a fresher to invest in various mutual funds rather he should concentrate solely one MF to understand the business much better.
One of the best advantages of a MUTUAL FUND is its access. Someone with as low as 1000rupees could be a part of the fund. This stands to be the most important factor that influences the number of people opting for mutual funds.
The most important types of Mutual funds include: Money market funds, Income funds, bond funds, balanced and equity funds etc. Even before all these types are discussed, one of the broad classifications of a mutual fund is the stock fund and Bond fund.
Equity linked saving schemes are considered as the choice of the best Tax saving investents. Since they have 3 years lock in period,
investor can have better liquity optiones compared to NSC and PPF. Investor has a choise of going for single investments or SIP. All investments under ELSS offer tax benefits under sec 80 C of income tax act. Even profits (returns ) from ELSS after 3 tears lockin period are tax free.
Price of shares in a company are not fixed. Depending on the company's interest rates the price of shares vary.
The income funds are merely depended on the present income earned by an organization. Income funds are also called as the Exchange-traded fund (ETF). While there are many subdivisions, Equity funds, bond fund, money market funds fall under the huge classification of income funds.
Money invested in stocks or equity of the company is called stock fund or equity fund. Depending on the amount available
with the investor,The stocks can be purchased. NAV - net asset value decides the price of a share. Based on the stock fund, the price of a stock varies. These are considered to be the best investments as they do not require high investments and can be accessed by everyone.
There are major variations between a bond fund and the stock fund. Bond fund basically involves investing in bonds and
other collaterals. The interest payments on the properties used as collateral are given to the bond fund holders which is a big advantage for the investors. Purchasing a bond fund helps raise the bond portfolio. There is always a constant change in the interest rates which affect the bond value or the net asset value. Hence, investing in Such mutual fund is not less than a risk.
Categorized as low-risk, low return investment plan, money market funds are investments in risk-free and accessible assets.
Money market shares are often available in mutual funds, private money lending sectors or banks. The investments are usually short term with an average tenure period. Very often investments are made on certificates or commercial bills.
Though the returns are low it is considered safe for senior citizens who wish to receive a fixed amount to meet their daily expenses.
These are often called the Hybrid funds as they include both stocks and bonds. Apart from stocks and bonds,
sometimes money market funds might also include in a single ownership. They provide safety, income and capital appreciation. Even though balanced funds are considered are the safest options, they are a risk. The risk in balanced funds is equity comes along with debt. While there could be profit if the equity is more, but the investor would have to face a huge loss if the debts are more.
Mutual funds are easy to understand and easy to access. This attracts everyone to invest in any of the funds keeping in mind their income. While this could be a profitable business, one mistake could drop huge loses. In order to avoid loss, contact FINSTRUMENT for the right advice and choose the right scheme and right company to invest.
FINSTRUMENT helps you to understand how companies work and the best way to be a part of the huge group of efficient players in the business.