What is Mutual Fund

Now a days mutual fund is getting a huge response from small investors. Also from recent study it was found that more then half of the mutual fund investor withdraw their money in short term because of many reasons. Today we are going to understand the basics of mutual fund and who can invest in it.

          All would be knowing the SHARE MARKET KING Rakesh Jhunjhunwala, he has earn and made lot of money from share market with its knowledge , time , experience etc. But people like salaried person or small investor can't invest in market directly because of limited knowledge , time and money.

          This is where MUTUAL FUND plays a big roll, this houses collect the small small amount of money from the many investor and the money collected from all the investors are invested in stock market in form of equity, debt, bond, fd etc.  The small amount of Rs 500 can also be invested on monthly basis or else a lump sum of any amount can be invested. The mutual fund manager on our behalf trade and invest in market and the profit or loss is shared with investor.  The fund manager with his expertise and knowledge tries to earn the money and return back to investors in form of profit.

          Now question comes who can invest in MUTUAL FUND, the answer to this is any person with any amount of money can invest in mutual fund and the best part of this is you can invest for 1 day to 1 years to 1 decade and go on. Now a days many Mutual fund provide the investing in mutual fund using online facilities or else one can contact the mutual fund distribution house.

          As said earlier you can invest for 1 day or for 1 decade. Now second question arise how to decide the time of investment. Normally there are 2 major classification of mutual fund which decide for how long you can invest. Debt fund and equity fund are major 2 classification of funds. Debt fund stand for fund which invest in instruments like Bond , fd , debentures etc. where the risk of losing money is less and return is also less compare to equity fund , in equity fund the fund manager trade in equity market directly. A equity market is violet the risk is higher as compare to debt fund but with good fund manager you can earn more. For short period of time one can invest in debt fund named liquid fund, ultra short term fund etc. For period ranging from normally a year and beyond one should go for equity fund named large cap fund, small cap fund, sectoral fund etc.

          Now a days there are many fund which provide combination of debt and equity fund which safe guard the money by investing in debt instruments and also helps to earn money by investing in equity market. Normally one who want earn to money rather want to grow the money one should invest for the minimum period of 1 year or beyond. Just for the simple reason stock market does not perform in 1 way, it may go up may go down but on a long run one can gain in the market, as one should know that mutual fund is dependent on market normally as market fall mutual fund prices are also fall. But if we go for the monthly invest we can outcome with this risk with the power of averaging the cost in SIP i.e monthly investment can help to lower the cost of purchase.

          This can be understood using this simple example say you are hawker you had purchased 10 kg potato on 15 Aug 2018 at the rate rs 40 per kg and on 17 Aug 2018 you purchase 10 kg potato at rate rs 30 per kg so average purchase cost of potato is rs 35 kg and when the prices potato goes to rs 40 or say goes to rs 38 you can sell the potato and earn rs 5 or 3 per kg respectively.

          This way on a long run the average cost will help to reduced the cost and can earn the profit. So it's advisable for the small investor to invest in mutual fund on the monthly basis.

          For further detail's leave your question on
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          Happy investing.