In today’s inflationary era, everyone wants to increase their savings and see their money grow rapidly. If you also want to earn more profit by investing your money wisely, then mutual funds can be a great option.
But many people have many questions related to it –
- What exactly is a mutual fund and how does it work?
- How safe is it to invest in it?
- Can my investment sink?
- Does mutual funds give guaranteed returns?
- If the fund manager takes a wrong decision, what will be the impact on our investment?
- Is a mutual fund safer than FD?
- To get answers to all these questions, let’s try to understand mutual funds in detail.
What is a mutual fund
Mutual fund is a means of investment where many people together deposit their money in small amounts with an experienced fund manager. Now this experienced fund manager puts together the small amounts deposited by all the people and invests them in many sources like share market/real estate/gold/debt etc. Now whatever profit he generates from the invested amount, he distributes that profit among all the people in proportion to their share. In this way mutual fund makes profit and people’s money grows. Simply put, it is a source of investing by seeing your money in the hands of an investor.
How does a mutual fund work?
- Investors invest money in mutual funds.
- Over time, this investment earns less profit or incurs loss.
- If there is profit, all investors are given a share of the profit in proportion to their investment.
- If there is a loss, the value of the investors’ portfolio decreases.
Types of Mutual Funds
- Equity Fund
- David Fund
- Hybrid Fund
Benefits of investing in Mutual Funds
- Low risk and more diversification – In mutual funds, the money given by you is invested in different fields by the fund manager so that if there is a loss in any sector, it can be managed with the profit from all other sectors.
- You can start with less money- One can invest in Mutual Funds with just ₹500. This is beneficial for those who want to invest small amounts of money.
- No need to understand the market – This is beneficial for those who do not have time to understand the market. So, there is no need for them to understand the market. All the work will be done by the fund
Very nice vlogs thank you investofit
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