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 returns can I expect with only 500 euros?
Whether you invest 500 euros or 5 euros, the returns are the same. Confused? Not if you consider returns on a percentage basis. For example, if a scheme has returns of 12% per annum, then an investment of 500 euros would increase to 627.20 euros in two years. An investment of 100,000 euros in the same scheme would be 1,25,440 euros during the same period. While the appreciation rate is the same in both cases, only the final amounts differ due to the difference in initial investments.
We must keep two things in mind. The returns in percentage terms are the same for any amount invested. However, a larger amount invested at the beginning would result in greater absolute gains.
All this should not distract an investor from making a start. This is the most important act in investing.