Mutual Funds: Features and Benefits

A Mutual Fund in India is an entity that pools the money of several investors with similar interest (investing in the best mutual funds) to buy into different securities ranging from Shares, Debt Markets to Money Market Securities as well. These securities are professionally managed on behalf of the unit-holders and each investor holds a pro-rata share of the portfolio, i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well.

Make your Mutual Fund Investments simpler with the best mutual fund interest rates at Bajaj Finserv. Currently the most sought after investment vehicle, Mutual Funds are a great way to start small and make it big with the help of constant expert advice available to you. Read on to know more about the benefits of Mutual Funds with Bajaj Finserv:

Small investments

With Mutual Fund investments, your money can be divided into smaller parts across different companies. This way, you reap the benefits of a diversified portfolio with small investments

Professionally managed

The pool of money collected by a Mutual Fund is managed by professionals who possess considerable expertise, resources and experience. Through analysis of markets and economy, they help pick favorable investment opportunities

Diversification

A Mutual Fund usually divides the money in companies across a wide spectrum of industries. This not only diversifies the risk, but also helps take advantage of the position it holds

Transparency and interactivity

Mutual Funds clearly present their investment strategy to investors and regularly provide them with information on the value of their investments. Also, a complete portfolio disclosure of the investments made by various schemes along with the proportion invested in each asset type is provided

Liquidity

Mutual Funds are usually liquid investments. Unless they have a pre-specified lock-in period, your money is available to you anytime you want subject to exit load, if any

Low transaction cost

Due to economies of scale, Mutual Funds pay lower transaction costs. The benefits are passed on to Mutual Fund investors, which may not be enjoyed by an individual who enters the market directly.

Regulations

All the mutual funds are registered with SEBI. They function within the provisions of strict regulation created to protect the interests of the investor

Types of Mutual Funds

Based on your goals and your investment horizon, Mutual Funds give you the option to invest your money across various asset classes like equity, debt and gold. This allows you to diversify your investments and strive to reduce your portfolio risk.

The different types of Mutual Funds are as follows:

Equity Funds/Growth Funds

Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over a medium to long-term investment horizon. Equity Funds are high risk funds and their returns are linked to the stock markets. They are best suited for investors who are seeking long term growth. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.

Diversified Funds

These funds provide you the benefit of diversification by investing in companies spread across sectors and market capitalization. They are generally meant for investors who seek exposure across the market and do not want to be restricted to any particular sector.

Sector Funds

These funds invest primarily in equity shares of companies in a particular business sector or industry. While these funds may yield higher returns, they are riskier as compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.

Index Funds

These funds invest in the same pattern as popular stock market indices like CNX Nifty Index and S&P BSE Sensex. The value of the index fund varies in proportion to the benchmark index. The Net Asset Value (NAV) of such schemes rise and fall in accordance with the rise and fall in the index. This would vary with the benchmark owing to a factor known as “tracking error”.

Tax Saving Funds

These funds offer tax benefits to investors under the Income Tax Act, 1961. Opportunities provided under this scheme are in the form of tax rebates under section 80 C of the Income Tax Act, 1961. They are best suited for long-term investors seeking tax rebate and looking for long term growth.

Debt Fund / Fixed Income Funds

These Funds invest predominantly in rated debt/fixed income securities like corporate bonds, debentures, government securities, commercial papers and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seeking regular and steady income. These are less risky as compared to equity funds.

Liquid Funds / Money Market Funds

These funds invest in highly liquid money market instruments and provide easy liquidity. The period of investment in these funds could be as short as a day. They are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods of time.

Gilt Funds

These funds invest in Central and State Government securities and are best suited for the medium to long-term investors who are averse to risk. Government securities have no default risk.

Balanced Funds

These funds invest both in equity shares and debt (fixed income) instruments and strive to provide both growth and regular income. They are ideal for medium to long-term investors willing to take moderate risks.



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