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.
What are the types of financial goals I can achieve with mutual funds?
The best part about mutual funds is that regardless of your financial goal, you can find an appropriate scheme for it.
So, if you have a long-term financial goal such as retirement planning or your child’s future education, equity funds might be a choice to consider.
If your effort is to potentially generate a regular income, a fixed income fund might be considered.
You may have suddenly received a boon of money and have not yet decided where you want to invest, you can consider a liquid fund. Aliquid fund is a good substitute to consider for a savings account or even a checking account to park your working capital.
Mutual funds also offer tax-saving investment options. Capital Savings Schemes (ELSS) are specifically designed to do the same
Mutual funds are a one-stop-shop for virtually all investment needs.