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.
Can I invest even if I don’t know when I will have to withdraw them?
Articles about mutual funds are usually written to plan for the achievement of certain specific long-term goals, and investors assume that other goals, particularly in the short term, cannot be achieved.
Let’s break this myth with an example.
Ramesh, a travel junkie, was able to satisfy his wanderlust when the company he worked for achieved success and rewarded his employees with bonuses.
With his bonus Ramesh decided to take a trip to Europe, but his work on a large and prestigious project was incomplete and approaching the deadline. The project will end in the next eight months.
The exact date of Ramesh’s trip has yet to be finalized. Looking at his expenses, some money needs to be spent before and some during the trip. Uncertainty about the exact dates when how much money is to be paid is present.
Some mutual fund schemes are ideal for such cases.
Ideally Ramesh should park these savings in a liquid bottom to take them out on any working day. The money will be in your account the day after you submit a withdrawal request. Ramesh can also request withdrawal via SMS or an app.
Planning even short-term goals becomes convenient with this.