A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
Are mutual funds an ideal investment for the small investor?
Yes! Even for an investor with modest savings or small starts, mutual funds are an ideal investment vehicle.
Almost every investor, small or large, has a Savings Bank (SB) account, and anyone with that account can start investing through mutual funds. With amounts of only 5 euros each month, mutual funds promote the healthy habit of investing regularly.
Other advantages for a small mutual fund investor are-
- Ease of transaction- Investing, reviewing, managing and redeeming from a mutual fund scheme are all simple processes.
- Easy liquidity, maximum transparency and disclosure, timely account statements and tax benefits are everything a small or first-time investor is looking for.
- Dividends in mutual funds are tax-free at the hands of the investor
- A mutual fund gives the same investment performance, to an investor who has invested 500 euros or one who has invested 5 euros. So he has in mind the interests of every investor, small or large.
- Professionally managed diversified portfolio for someone who invests even 5 euros per month.