A mutual fund is an investment vehicle, which pools money from investors with common investment objectives. It then invests their money in multiple assets, in accordance with the stated objective of the scheme. The investments are made by an asset management company or AMC.
WHY INVEST IN MUTUAL FUNDS?
In open-ended schemes, you can get your money back at any point in time at the prevailing NAV (Net Asset Value) from the Mutual Fund itself. Mutual fund investments are highly liquid. Compare that with a fixed deposit or a bond which has a fixed investment duration.
While investing in mutual funds, you are spoilt for choice. You have a number of mutual fund schemes to choose from, which may invest in a whole range of industries and sectors, different kinds of assets, and so on. You can find a mutual fund that matches just about any investment strategy you select.
SEBI regulations for mutual funds have made the industry very transparent. You can track the investments that have been made on your behalf to know the sectors and stocks being invested in.
In addition to this, you get regular information on the value of your investment. Mutual funds are mandated to publish the details of their portfolio regularly.
A mutual fund enables you to participate in a diversified portfolio for as little as Rs 2500/-, and sometimes even lesser. And with a no-load fund, you pay little or no sales charges to own them.