What Are Mutual Funds?
A mutual fund is a type of investment vehicle that pools money from multiple investors to purchase securities such as stocks, bonds, and other assets. The funds are managed by a professional asset manager who invest the money in different securities to help the investors earn a profit.
Some Advantages of Mutual Funds
- Professional Management: Mutual funds are managed by professional asset managers who have years of experience in the financial markets. They have the expertise to make informed investment decisions and help investors earn a profit.
- Diversification: Mutual funds invest in a variety of securities, which helps reduce or mitigate the risk. This diversification helps protect the investor's portfolio from market volatility.
- Liquidity: Mutual funds are highly liquid investments, which means that investors can easily buy and sell their units at any time.
- Tax Benefits: Mutual funds offer tax benefits to investors. For example, in general long-term capital gains from mutual funds are taxed at a lower rate than short-term capital gains. Also, by investing in ELSS mutual funds investors can save tax on income of up to Rs. 1.5 lakh (under 80C), but these funds have a lock-in period of 3 years.
- Affordable: Mutual funds are affordable investments that allow investors to start with small amounts of money. You can start investing in 1000+ mutual funds with as low as Rs. 100 on the Bajaj Finserv platform.
- Safe and Transparent: Mutual funds are regulated by the Securities and Exchange Board of India (SEBI), which ensures that they operate in a safe and transparent manner.