A mutual fund is a vehicle which pools money from thousands of small investors and
then the fund manager buys stocks, bonds or other securities with it. When you buy
units of a mutual fund, you get a stake in all the companies in which the investments
While investing in mutual funds it may be noted that the business affairs of a fund
company is of minimal practical importance to investors. Investor’s do not normally
have to bother about who the promoter of a fund company is or who the CEO is and
who’s on the board of directors. The regulatory framework acts as a fire-wall, ensuring
that any issues on the business side do not affect the investors.
Since most funds allow you to start a investing with as little as a few hundred
rupees, you can attain a diversified portfolio for much less than you could buying
individual stocks and bonds. Moreover, you do not have to worry about keeping track
of dozens of holding across equity and debt instruments with a professional fund
manager doing that job.
Mutual funds are safer than direct investment in the stock market but there is no
No stock market related investments can guarantee capital protection. Mutual funds
have an element of risk and volatility. They do not guarantee inflation protection,
however, over the long term mutual fund investments are known to beat inflation
and create wealth.
Almost all funds are highly liquid except for close-ended and tax planning funds.
Redeemed amount will be credited to your bank account in 3-4 days.
Investing in mutual funds attracts income tax at the time of dividend payment in
case of debt funds or when the units are redeemed with capital gains.
Benefits of investing in Mutual Fund:
Access to professional managers who manage your investments
Diversification: Mutual funds aim to reduce the volatility of returns
through diversification by investing in a number of companies. This inherently minimizes
risk. Thus with small sums an investor can achieve diversification which would otherwise
not been possible.
Liquidity: Investors can sell their holdings in mutual fund investments
anytime without any hassles.
Tax Efficiency: Investments in equity mutual funds for one year
and above are tax-free. Investments in tax planning funds qualify for tax deduction
and after the lock-in are tax-free.
Low transaction costs
Transparency: Price of units is declared daily and regular updates
on the value of your investment are available.
Well-regulated industry: All the mutual funds are registered with
Securities Exchange Board of India (SEBI) and function under strict regulations.
Convenience of small investments: A mutual fund permits risk diversification
without an investor having to invest large sums of money. The minimum investment
can be as low as Rs.500 per month.
Invest systematically and regularly in mutual funds through SIPs to make the most
of long-term investing and the power of equity.
Build a portfolio of funds based on your risk profile to achieve financial goals.
There are several strategies adopted by investors depending on their risk appetite,
requirements and understanding of mutual funds.
Choose SenSage as your Investment Advisor as mutual funds are subject to market
Mutual funds are the way out for anyone looking at gains from equity investing with
limited sums to invest and yet get diversity with the investments.