Financial planning through Mutual Fund
A mutual funds is an investment vehicle, through which a large number of investors pool in their money to invest in a range of instruments, etc,in line with the investment objectives agreed upon,between the mutual fund and the investors.
mutual funds are run by asset management companies investirs money is managed by a professional fund managar who user his kniwledge and experience, to invest your money in various financia instuments and securities.
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What is a Mutual Fund?
A mutual fund is a pool of money from numerous investors who wish to save or make money just like you. Investing in a mutual fund can be a lot easier than buying and selling individual stocks and bonds on your own. Investors can sell their shares when they want.
Professional Management. Each fund’s investments are chosen and monitored by qualified professionals who use this money to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments or a combination of those.
Fund Ownership. As an investor, you own shares of the mutual fund, not the individual securities. Mutual funds permit you to invest small amounts of money, however much you would like, but even so, you can benefit from being involved in a large pool of cash invested by other people. All shareholders share in the fund’ s gains and losses on an equal basis, proportionately to the amount they’ve invested.
Why should you invest in mutual funds?
Diversification : A mutual fund spreads you money across a diverse number of securities.it ensures that all your eggs are not in one basket.thus reducing the risk in investment, which for an individual investor is tough to practice.
Wide Choice : In india wide variety of mutual fund schemes are offered by 43 mutual funds AMCs. so there is a scheme available for every kind of risk and return appetite and every time horizon.
Safe & Convenient : It is possible for investors to structure thire investments according to their liquidity and taxation requirements.Further, an investor can withdraw his investment fully or partially,anytime from the the mutual fund. mutual fund transaction are safe as all transaction are carried out via your bank account only.
Well Regulated : Mutual Funds are regulated by Khushi Financial. the latter has mandated strict checks and is constantly refining rules and regulation to keep a check on mutual funds activities and hence ensures investirs protection.
Tax Savings : Investment in ELSS Mutual Fund Schemes is eligible for deduction of upto 1.50 Lacs P.a. under Section 80c of the income tax Act., Further , ELSS scheme has the minimum lock in period of 3 years amongst all tax saving insruments.
Online Transaction : Now all mutual fund transaction can be executed completely online through a demat account.Now an Mf transaction can be done from your smart phone and no papework in involved.
Systematic : Option to invest systematically through SPI & STP and withdraw regularly through SWP.
Mutual Fund Objectives
There are many different types of mutual funds, each with its own set of goals. The investment objective is the goal that the fund manager sets for the mutual fund when deciding which stocks and bonds should be in the fund’s portfolio.
For example, an objective of a growth stock fund might be: This fund invests primarily in the equity markets with the objective of providing long-term capital appreciation towards meeting your long-term financial needs such as retirement or a child’ s education.
Benifit of Mutual Fund
- – Simplicity :- Mutual Funds Are Easy to Understand.
- – Accessibility :- Mutual Funds Are Easy to Buy
- – Variety :- Mutual Funds Come In Many Different Categories and Types
- – Affordability :- Mutual Funds Have Low Minimums
- – Frugality :- Mutual Funds Cost Less to Manage Than Other Portfolio Types
- – Flexibility :- Mutual Funds Have Several Uses and Applications
These funds invest in short-term fixed income securities such as government bonds, treasury bills, bankers’ acceptances, commercial paper and certificates of deposit. They are generally a safer investment, but with a lower potential return then other types of mutual funds. Canadian money market funds try to keep their net asset value(NAV) stable at $10 per security.
These funds buy investments that pay a fixed rate of return like government bonds, investment-grade corporate bonds and high-yield Corporate bonds. They aim to have money coming into the fund on a regular basis, mostly through interest that the fund earns. High-yield corporate bond funds are generally riskier than funds that hold government and investment-grade bonds
These funds invest in stocks. These funds aim to grow faster than money market or fixed income funds, so there is usually a higher risk that you could lose money. You can choose from different types of equity funds including those that specialize in growth stocks (which don’t usually pay dividends), income funds (which hold stocks that pay large dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.
These funds invest in a mix of equities and fixed income securities. They try to balance the aim of achieving higher returns against the risk of losing money. Most of these funds follow a formula to split money among the different types of investments. They tend to have more risk than fixed income funds, but less risk than pure equity funds. Aggressive funds hold more equities and fewer bonds, while conservative funds hold fewer equities relative to bonds.
These funds aim to track the performance of a specific index such as the S&P/TSX Composite Index. The value of the mutual fund will go up or down as the index goes up or down. Index funds typically have lower costs than actively managed mutual funds because the portfolio manager doesn’t have to do as much research or make as many investment decisions.
These funds focus on specialized mandates such as real estate, commodities or socially responsible investing. For example, a socially responsible fund may invest in companies that support environmental stewardship, human rights and diversity, and may avoid companies involved in alcohol, tobacco, gambling, weapons and the military.
These funds invest in other funds. Similar to balanced funds, they try to make asset allocation and diversification easier for the investor. The MER for fund-of-funds tend to be higher than stand-alone mutual funds.