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.
Should you invest in the direct plan of a mutual fund?
Among thousands of mutual fund schemes available on the market, how can you choose 4-5 funds that are most appropriate for your portfolio? If you are new to mutual funds, investing with the help of an advisor/distributor through a regular plan is advisable instead of a direct plan, since you need to understand how mutual funds work, what you should look for in a fund, what type of fund to invest in, etc. It’s better to support the distributor’s fee in a regular plan than to end up with the wrong set of funds in your portfolio that can derail your future goals.
Unless you understand the types of funds,
how funds build their portfolio according to the investment objective, the level of risk in a fund, whether a fund is suitable for the short or long term, will provide normal income or wealth creation, which are the performance indicators of a fund and finally why you are investing; you need guidance in selecting funds A direct plan works Good only for those investors who have invested in mutual funds for some time and understand these products. It would be a good idea to start investing in a regular plan and switch to the direct plan for future purchases after gaining some experience with your existing portfolio.