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 to plan your retirement with mutual funds?
Most people don’t think about retirement until they’re close to retirement. The entire working life is spent on fulfilling one requirement after another, the right to own a vehicle, a house, raise a family, educate children at their marriages. Once these responsibilities have been taken into account, we begin to look at how much remains for the retirement life that is just around the corner. That’s when people start thinking about investing their life savings in something that can give quick returns in a short period before the start of retirement. This is a wrong way to plan that stage of life when you need maximum comfort, security, good health care, and livelihood beyond the age of 15-30 without regular income.
Planning for this phase must begin as soon as possible. Whatever your earnings and lifestyle, you can always save the money you have left after paying all your expenses and fulfilling your financial commitments, you definitely have some money at the end of each month after paying all bills and other liabilities such as EMI car, EMI home loan, investments for children, emergency fund, etc. Even if the amount is small, investing it in the right instrument can help you create wealth in the long run. And what better tool than mutual funds! You can invest in mutual funds every month via SIP with as little as Rs. 500 per month and increase the amount as your income/savings grow. You will be pleasantly surprised when you see the power of compounding its magic and who knows you might end up with the proverbial basket of golden eggs!