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What's a mutual fund and how to maximize your investment?
Investing in mutual funds is one of the major ways through which individual investors can maximize the returns on their investment. Here are some tips to ensure that you make the right decisions when putting your money in a mutual fund.
MUTUAL FUNDS are basically mutual decisions on part of an investor and a financial intermediary or an agent to invest a pre-decided sum of 'fund' or money in a certain way in a particular proportion of debt and equity.
If you don’t want to invest directly in shares but want similar returns without associated risks with direct equity investment, then investing in a mutual fund is a profitable alternative.
In simple terms, an invested sum of money is divided into units, each having a Net Asset Value, which increases or decreases based on the performance of the stock market. It’s upto the investor to decide how the units are distributed in shares and debt instruments such as government securities, and even in gold units.
The most important thing to remember while investing in mutual funds is to stay invested for a minimum of three years for returns to materialize. The longer an investor stays invested the more time he gives himself for the market to even out in terms of fluctuations and reach maximum market and share capitalization based on the performance of the local and global economy.
This is why choosing the “right” mutual fund is a critical decision. Generally, the longer a mutual fund has been in the market with evident and consistent results, the better bet it will be for an investor.
The amount to be invested in a mutual fund can be decided on the basis on budget, liquidity, and state of the share market. Further, there are many mutual funds that come with a tax saving advantage as well as insurance benefits. The modern mutual investor is much better off than say ten years back when the mutual fund market was not all that sophisticated.
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