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 company in the UK.
RD and FD are not enough to guarantee the future?
Recurring deposits (RD) and fixed deposits (FD) are some of the most popular savings instruments in our country. They are safe and offer a guaranteed rate of return.
It really depends on what an investor expects from the future. If the investor wants his capital to be safe and earn a reasonable fixed rate of return, regardless of inflation and taxes, then these could be quite good. However, if the investor wants to earn a positive return even after taking inflation and taxes into account, then these may not be good enough.
If an investor has a corpus large enough to get started with and isn’t really concerned about improving purchasing power, then RD and FD are safe and useful savings and income options. If an investor is more concerned about capital security and receiving timely and predictable income, an FD may be ideal.