Mutual Fund Investment

Category: Finance


If you want your money to give you a return on investment at a rate of other financial securities but don’t have the time to track each and every movement of the market, then mutual fund investment should top the list of your possible investment options.

For the point of discovering opportunity in a segment to maturity of the scheme, Mutual Fund investments are monitored by expert financial fund managers. They pool the resources from the investors, segregate it on the basis of their risk appetite and the pooled resources are deployed accordingly. For the efficient deployment of the funds, fund manager charges a fee which is deducted from the returns of the funds. The pooled funds are further divided in small tradable denomination, known as units. Small investors can buy and sell these units and any increment in the value of fund is divided among the unit holders in the proportion of unit’s investor holds

The way in which funds will be invested are explained in advance to the prospective investors at the inception. There are numerous mutual fund investment schemes where money is invested in different securities in different proportions. There is equity based mutual funds scheme where more than 50% of the investments are made in equity shares, similarly there are debt-based schemes as well.

Investors with low risk appetite are advised to go for scheme which invest in fixed income-based security with assured returns, like preference shares and debentures. Similarly, the investors with moderate risk profile can go for blue chip funds and people with high risk profile can go for pure equity-based funds.

Investors should buy the schemes keeping their goals and commitment in mind. Schemes which are going to take 4-5 years in maturity should not be brought for commitment which are to meet in matter of a year.

Since mutual funds are overseen by the professional management, it eliminates the need of the retail investor to consciously monitor the stock market and evaluate the constant flow of unsolicited advices from armature market players.

With all those merits, there are some factors which should be kept in consideration while making an investment.  Since mutual funds have majority of their investment in financial securities, the value of unit’s changes in accordance to the changes in the value of underlying security. So, any major unfavorable fluctuation in the market can adversely impact the value of mutual fund.