Despite their simplicity, low-cost, and well-diversified way of building wealth, mutual funds are not preferred for investment by the majority of folks who are either unaware of these or find them too complicated.
If you're one of them, here you can find a mutual funds complete guide that will help you step into this investment world with ease.
A mutual fund is an investment that pools money from several investors and invests these funds collected in various securities such as stocks, shares, bonds, gold, money market instrument, etc.
These are professionally managed by a trust referred to as an Asset Management Company (AMC), also called a mutual fund house. When you purchase a mutual fund, you acquire a small stake in the investments present in the fund, which within time, delivers your return.
You can start investing in mutual funds in two ways, such as:
Next, in the mutual fund guide, learn why mutual funds are becoming increasingly popular investment choices. Among the various benefits, the most crucial factors that drive investors to mutual funds for investment are:
For first-time investors, the beginners guide to mutual funds covers essential tips that will help them sail carefully.
Want to understand the world of mutual funds in a nutshell? Check out this video:
Investing in a good mutual fund scheme yields greater profit and helps secure your financial future. Fi is the ideal gateway for first-time investors. With its smart interface, commission-free investments, and 100% flexibility, you can invest in around 800 direct mutual funds.
A mutual fund is a kind of investment instrument that funds money from various investors and allocates funds in several securities. Fund managers carefully invest money in different securities to deliver high returns to investors.
Most mutual funds come under four main categories, which are Money Market Funds, Bond Funds, Stock Funds, and Target Date Funds. While Money market funds have relatively low-risk factors, Bond funds produce higher returns. Additionally, Stock funds invest in corporate shares, and Target date funds are a mix of bonds, stocks, and other investments.
A market benchmark is the standard used to measure the mutual fund's performance. Alpha, a financial ratio, shows the returns generated by the fund over and beyond the return yielded by the benchmark index.
Mutual funds are a low-cost, diversified, and tax-efficient way of building wealth. On the other hand, mutual funds have shortcomings such as not guaranteed returns, high-fee, poor trade execution, and entry or exit load.
Investors can manage the risk after carefully understanding mutual funds and their terms before investing.