What is mutual fund?
Mutual fund is a pool of small investments collected from various investors, which are then invested into different financial instruments such as Stocks, Bonds, Preference Shares, Fixed deposits (as prescribed by the Mutual Fund Regulation, 2067) . The decisions are made by the fund manager and the profit is distributed at the year-end in the form of cash dividend. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
The present worth of investment can be known from the weekly/monthly NAV published by the company. NAV stands for Net Assets Value. The company also publishes a monthly balance sheet every month which makes the mutual fund fully transparent. An investor can easily trace which company are chosen by the mutual fund.
Since the total fund is invested in diversified sectors by the team of expert, it is one of the least risky form of investment. This being highly liquid, one can easily sell it in the secondary market. The investors doesn’t only get a regular return, but also get a capital gain on their investment. Thus, this can be a best form of investment both for the experienced as well as new investors.
Mutual fund offers several other benefits, let us analyze some major reasons to invest in the mutual fund
Government has current been keeping Mutual funds in its priority, this can easily be known by the facilities it has been providing. Also Government has made mandatory provisions to allocate 5% of the total Initial Public Offering (IPO) for mutual funds.
In order to start an investment in mutual fund one doesn’t need a big chunk of money. One doesn’t invest in mutual fund, rather invest through a mutual fund. Thus one can invest in diversified sectors with a small fund as low as Rs 1000, where he gets 100 units of Face value Rs. 10.
Describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. As the units of Mutual funds are listed in the stock exchange, one can easily sell them or pledge them.
Mutual Funds do not require a great deal of time or knowledge from the investor because they are managed by professional fund managers. Also they are guided by experts. Team of managers, researchers and analysts continuously research, select, trade and monitor performance of the securities.
Any individual investing in a mutual fund is free from all kind of hassles. All kind of analysis either fundamental or technical will responsibly be done by the management team. This saves a lot of time and energy of an investor. Ultimately putting less burden upon the investor.
The investment decisions made by the mutual fund team is highly transparent as it can easily be traced from the monthly report. All the positions either purchase or sell can be detected by the investors. Even the cash holding as well as the worth of portfolio is timely disclosed in the report. Thus, mutual funds offer a high degree of transparency.