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 is the ideal amount to start investing in a mutual fund?
Several questions rest in the mind of a potential investor regarding the ideal amount to invest. People see mutual funds as just another avenue of investment. Is that really the case? Is a mutual fund just another avenue of investment like a fixed deposit, deposit, or company shares?
A mutual fund is not an investment avenue, but a vehicle to access various avenues of investment.
Think of it this way. When you go to a restaurant, you have the option to order a la carte or buffet/thali or a full meal.
Compare the full thali or meal with a mutual fund, while the individual items you order are stocks, bonds, etc. A thali makes the choice easy, saves time and even some money.
The important thing is to start investing early, even if small, and gradually increase your investments as your earnings increase. This gives you better prospects for better long-term returns.
