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.
How can I achieve my financial goals?
To begin with, it’s important to select the right scheme for your investment needs. Look at it this way.
How do you decide which mode of transport you should take when traveling? Whether you want to walk, take an automatic rickshaw, a train or a flight, it all depends on your destination, your budget and the travel time available.
Planning your financial goals also uses the same kind of principles.
Different modes of transport for different travel needs – different patterns (or combination of patterns) for different needs.
They can be considered liquid funds for very short-term needs; income funds for medium-term needs and equity funds (or a combination of different funds) for long-term needs. Different investors may invest in different schemes of the same asset class depending on the risk they are willing to take.
Remember, there are solutions available among mutual funds for every investor need. It is important to understand your unique need to find which solution is appropriate.
