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 start with 5 euros and then continue adding on mutual funds?
“The concept of popular investment to create wealth is ‘Start early.'” Invest regularly. Stay invested for the long term.’ Although the investment is low, only € 5, it is important as it marks the beginning of a journey.
There are several ways to increase your investment amounts as you go. In a mutual fund scheme, you can always make additional purchases in the same fund/account. In many fund houses, this can be for amounts as little as €1 or the money can be transferred or exchanged from other schemes. You can initiate a systematic investment plan (SIP), which allows for regular investment in a scheme, just like a recurring bank deposit. In addition, many AMCs allow their investors to gradually increase their SIP contribution each year, so as to take into account an annual salary or an increase in income.
Mutual funds, with their flexibility and affordability, are the ideal investment vehicles in today’s fast-paced world.