Posts Tagged ‘Investment Funds’

Mutual Funds and Their Benefits

A Mutual Fund is an investment vehicle operated by an Asset Management Company (AMC) and is required to be registered with SEBI (Securities and Exchange Board of India). AMC raises money from individual investors and invests the money on behalf of the investors or unit holders, in stocks, bonds, money market securities, options, futures, currencies, government securities etc., and distributes the profits to the investors.

The mutual fund will have one or more fund manager(s), who will be responsible for investing the gathered money into specific securities (stocks or bonds). In other words, it allows an investor to indirectly take a position in a basket of assets. Even if you are new to stock market you can start with mutual funds since your investment fund hires a dedicated fund manager who manages the fund. The income earned through investments and capital gains is shared by the investors in proportion to the number of units owned by them.

Here, we choose fund’s strategy rather than investment. As an amateur investor, if you start with mutual funds, you will be able to manage your risk better than by going for individual trading. Here, you can clearly understand their operation.

Investors pool their money with -> fund managers -> invest in securities -> generate returns -> passed back to investors

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