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.
What is the Systematic Investment Plan (SIP)?
The systematic investment plan (SIP) is an investment path offered by mutual funds in which you can invest a fixed amount in a mutual fund scheme at regular intervals, such as once a month or once a quarter, instead of making a lump sum investment. The amount of the installment could be equal to 5 euros per month and is similar to a recurring deposit. It is convenient as you can give permanent instructions to your bank to charge the amount every month.
SIP is gaining popularity among Indian MF investors, as it helps to invest in a disciplined manner without worrying about market volatility and market timing. The systematic investment plans offered by mutual funds are easily the best way to enter the world of long-term investing. It is very important to invest for the long term, which means that you should start investing early, in order to maximize the final returns. So your mantra should be – Start early, invest regularly to get the best out of your investments.