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.
At what age should you start investing?
If you’re wondering if it’s too early or too late to invest in mutual funds, rest assured that the right age to start investing is actually now, the moment you decide to invest. But the sooner you start investing, the better it will be for you, as mutual funds help create long-term wealth through the power of composition.
For the power of compounding to work its magic on your investments, you need to start early in your career. In fact, the ideal time to enter mutual funds would be the day you start earning. If you can save some of your monthly earnings and invest them in mutual funds through SIP, you’re giving your money enough time to grow. You will be able to reap the benefits of such a disciplined investment approach in the future when the need arises. Remember to invest in those mutual fund schemes with risk levels that match your risk appetite, i.e. your ability and willingness to take that type of risk.
As we progress in life, our life goals become greater as wages rise. Start your investment journey through a SIP with your first salary and increase it with each salary increase to comfortably achieve these goals. But even if you haven’t started yet, it’s never too late to start your Common Fund journey today because the power of composition can still give you more than if you delay the decision by a few years.