What is a Mutual fund?
How mutual funds work is by collecting money from lots of investors and then investing that money in stocks and bonds. Mutual fund is to invest in a balanced way so as to mitigate the risk associated with investments as much as possible. Being an investment that is made in the markets, there is an inherent risk that comes with this investment and investors must know that the money is being handled by an expert (Fund Manager).
Types of mutual funds
Equity
Debt
Hybrid
Other
Solution Oriented
Advantages of Mutual Fund
Since the investments are actually done by an experts, investors are not required to have an expert understanding of the markets and how they function.
Investments made in tax saver mutual funds are exempt from tax under section 80C.
Investors can chose the risk level from low, medium and high risk funds based on their appetite for risk.
Risks are mitigated by investment the money in different stocks and bonds.
Mutual funds that don't have lock in periods can offer liquidity when needed.
There is no need for large sums of money to begin investing in mutual funds.
Invests can also be made in SIPs, (systematic investment plans) where a specific amount can be paid towards the mutual fund every month.