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What is a Mutual Fund?

A Mutual Fund is an investment product that is made up of a pool of funds collected from many investors & this pool of fund collectively is invested in securities such as stocks, bonds, money market instruments and similar assets. The Mutual Fund investments are operated by Money Managers or Fund Managers, who invest the Mutual Fund’s pool of money and attempt to produce gains in the investment amount thereby generating income for the fund's investors. In simple terms, Mutual Fund can also be defined as an alternative investment vehicle to substitute an easy & less risky entry into stocks and bonds, because Mutual Funds pool the money of several investors and invests the same ultimately in stocks, bonds, money market instruments and other types of securities only. Mutual Funds carry a well defined objective as where (in which sector or industry or business or type of instruments) the funds will be invested by the Fund Managers.

The company that puts together a mutual fund is called an Asset Management Company (AMC). An AMC may have several mutual fund schemes with similar or varied investment objectives of investing the fund by the Fund Managers. Generally the most common objectives are Equity, Debt, Money Market, Index, etc.

Why should you invest in Mutual Funds?

You earn money & save some part of it for the future. The savings done by you, in practical sense, is eaten up piece by piece due to inflation. Hence you need to invest your savings in such a way that it grows faster than the inflation & only then your savings will stay alive. There are many investment options like Bank Deposits, Bonds, Gold, Silver & Share Market before you. The stock market has been proved to give the highest return over the years. But still you don’t wish to enter into stock market, primarily because of 2 reasons: Ignorance & Risk Factors. A Mutual Fund is an answer to both the fears. When you buy a mutual fund, you understand that the fund management will be done by a team of professionals who have decades of experience, truckloads of research & market data with them & who are able to track the market tick by tick, which puts them into command. Secondly, their pool of fund is so huge that the investment made by them gets spread over so many products & stocks across different industries and this in turn reduces your risk factor.

It is rightly said that Mutual Funds act as a gateway to enter stock markets in a relatively safer & sound way.

What are the advantages of investing in Mutual Funds?

Investing in mutual funds has some unbeatable benefits and that’s why Mutual Funds are better than many other investment options. For most of the investors, mutual funds provide an attractive investment choice because they generally have the following features:

  • Professional Management — Professional Fund Managers who have years & years of experience of market and have all the market data & various research reports do the selection and take investment decisions.
  • Diversification — There is a simple investment philosophy that "Don't put all your eggs in one basket." Spreading your investments across a wide range of sectors, companies & industries can help you considerably reduce your risk if a company or sector doesn’t do well. You would find it easier to achieve diversification through ownership of mutual funds as they would give you such a coverage that is impossible to be done through direct purchase of individual stocks by you.
  • Affordability — Mutual Funds investments can be started with very small amounts, in some cases even as low as rupees 1000 and even with such small amount of money, your exposure to diversified stocks or industries remains the same. Just like recurring deposts in banks, investment in Mutual Funds can also be done on a monthly basis, through systematic investment plan (SIP) route.
  • Liquidity — You can readily redeem (sell) your Mutual Fund units any time at their current price (Price is referred as Net Asses Value- NAV) minus any fees and charges assessed on redemption.
  • Convenience — Most of the funds & plans provide you the convenience of periodic purchase plans like monthly investments, systematic withdrawal plans and systematic reinvestment of interest and dividends.
  • Flexibility and variety — You can pick from a wide range of funds which are debt based, blue-chip stock funds, sectoral funds for the sector that you understand well, or funds that aim to provide income with modest growth or those that take big risks in search for returns. You can even buy balanced funds, or funds which are a combination of stocks and bonds.
  • Tax benefits on investment in Mutual Funds — Investing in ELSS (Equity Linked Savings Scheme) allows you to claim deductions as per section 80C of Income Tax Act and enjoy the tax benefits as well. On top of this Dividends received from Mutual Funds are 100% tax free.
What are the disadvantages of Mutual Funds?
  • Costs of investing — Investors have to indirectly pay sales charges, annual fees, and other expenses. In some cases an exit load at the time of redemption/sell of mutual funds units may be applicable. Depending on the timing of their investment, investors may also have to pay taxes on any capital gains.
  • No Direct Control — As an Investor you can select a fund but you don’t have a say in what should be the structure or make up of the funds, when to exit which sector & when to enter another one. All this is governed by fund managers who have better resources & knowledge.
Which Mutual Funds should I buy?

At present there are more than 50 AMCs (Asses Management Companies) collectively managing thousands of Mutual Funds Plans & Schemes. So to decide which mutual fund you should buy, you need an expert advice. At Raghunandan Money, we don’t perplex you with market jargons & thousands of plans. Our financial planners simply understand your investment objectives & needs, and accordingly they pull out the best 5 investment options for you. We explain you the pros & cons of whatever we suggest and help you make an informed decision.

How can I invest in Mutual Funds? How will Raghunandan Money help me?

At Raghunandan Money, Investing in Mutual Funds is the easiest thing to do. Whether you are a beginner or accustomed to the Mutual Funds, we provide unmatched edge to make your investments rewarding. Raghunandan Money is an AMFI registered broker and offers numerous mutual funds & plans, all available under one roof. We do risk profiling & need analysis, and only then we suggest the mutual fund plans which are best for you. We also give you a free access to your online portfolio, so that you can see all your mutual funds investments at one screen. We do conduct periodic health check of your MF portfolio to asses if any restructuring is required and accordingly keep advising you.

You can invest online in Mutual Funds with Raghunandan Money & if you wish to buy it offline we are always a call away.

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