MUTUAL FUNDS

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What is a Mutual Fund?

Investing in a mutual fund is like an investment made by many people with a common objective using a common benchmark to follow. An individual as a single investor is likely to have lesser amount of money at disposal than a group of like minded individuals. Now, let’s assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them. This is what a professional Asset Management Company does for mutual funds.

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Mutual Fund is a vehicle that enables to:

  • Provide security to your family.
  • Protect you and your family from:
    1. Home mortgage
    2. Loans
    3. Credit card borrowings etc.
  • Provide finance to your loved ones to achieve their goals in your absence such as:
    1. Child education
    2. Child marriage
    3. Spouse retirement
    4. Dream home
    5. Estate planning
    6. Insurance planning etc
  • Ensure that your family is able to maintain their lifestyle, no matter what happens.
  • Provide products suitable according to risk appetite:
    1. Very conservative – no risk takers
    2. Conservative – little risk takers
    3. Moderate – medium risk takers
    4. Aggressive – high risk takers
    5. Very aggressive – very high risk takers
  • Provide products for:
    1. Emergency fund
    2. Short term goals
    3. Medium term goals
    4. Long term goals
  • Take care of your tax planning needs.
  • Look at different investment and retirement savings vehicles.
  • Investment can be done using SIP and lumpsum.
  • Money can be withdrawn using SWP and lumpsum.

Technically speaking, a mutual fund is an investment vehicle which :

  • Pools investors’ money and invests the same for and on behalf of investors into :
    1. Stocks
    2. Bonds
    3. Money Market Instruments
    4. Gold
    5. Other Assets
  • The money is received by the AMC with a promise that it will be invested with a particular objective having a guiding benchmark by professional managers commonly known as fund managers.
  • The fund managers are expected to honour their promises.
  • The SEBI, AMFI and the Board of Trustees ensure that investment guidelines are actually followed.