Mutual fund

Mutual fund is an organized fund, where many investors put their money together for investment. Basically it is an institution, organization or company which invites people and collect money from them and creates a pool of money. After creating the pool, the fund manager who is expert in managing funds and highly qualified in finance sector, invests the money according to his knowledge and experience. Mutual fund is a safe way to invest money in stock market because all funds are managed by experienced fund managers who diversified your money in different sectors. But as performances of all mutual fund are based on stock market, so the value of money can be go up and down.
Mutual funds are basically three types according to risk bearing capacity.
1) Equity fund
2) Debt fund
3) Hybrid fund

Equity funds are those funds which invest its money to share and stock with high risk as well as high gain approach. Debt funds are those funds  which put its money to lower risk instruments like government bond or company's debentures.

Hybrid funds are mixture of equity and debt funds where money is invested in proportion of market demands.

There are different types of mutual funds on different basis.
For example, Capital basis:
1) Large Cap
2) Mid Cap
3) Small Cap.

Large cap mutual funds are those which invest in such companies where businesses are done in large scale. These large scale companies give us gradually and constant returns in long term with lower risk level. In a same way mid and small cap mutual funds invest in companies where businesses are done in mid and small scale respectively. They can give us early and high returns on investments but their level of risk always high. Market index affect on these companies more in compare to large scale.

Summary and advantages of Mutual funds:

1) Funds are supervised by experts fund manager. These fund managers are highly qualified, professional and experienced. They always shuffle investments according to market movement.

2) Low risk in compare to direct investment in stock market because in direct investment, money invests on specific stock where in mutual fund, money invests in different stock in small parts.

3) Diversification of money reduces our level of risk and increases possibility of high return.

4) Mutual funds always charge low fees for fund managing because their size of capital always large, so a small percentage of fees can give them a large profit.

5) Mutual funds can be the best in tax saving purpose. Nowadays companies are offering tax saving specific funds where an investor can get high return in compare to any other instruments available in market.

6) The power of compound interest can give to an investor a high return in long term. The way of investment by SIP is best way to create a wealth for anyone.


Thanks
Saurav..