I Raj(25) being a software professional. My friends and colleagues always suggested me to invest in mutual funds. I always wondered what is it and why? whenever i saw TV commercial or YouTube ad. It always comes with a disclaimer 'Mutual funds are subjected to risk, read the documents carefully before investing. This always pricked me and I always wondered why is it risky.
I went to Banks, every bank and an agent i met it confused me, more and more. I thought let me check online like always we do and i came across numerous websites, blogs and something new First Free Online Financial Advisers. I had a online chat with chat them, sometimes investing online is a worry so I asked them to call me .
They called me I spoke to them. The gentleman on the other line was very helpful, gave me an options how I can invest in mutual funds and the benefits of it . Types of Mutual funds. How I can redeem when ever I want to and save tax too.
I was very keen, confident and had a positive vibes so that I can invest my hard earn money into mutual funds. Yes, I was clear with the ex-claimer that suggested me Please read the document carefully before investing into mutual funds. With no time I decided I will invest the in Mutual Funds.
Types of Mutual Funds :
There are four types of Mutual funds. Probably, you can invest in any of these funds. You can invest mutual fund with low risk. You need to understand how market works. You can check them before you invest. I have mentioned them below.
1. Money market funds :
These money market funds are invested in money market instruments. These securities have very short time of maturity. As per net asset value you can sell to retail investors. These funds are considered to be a safe investment. But returns will be lower than other mutual funds. These funds are invest in short term for fixed income.
2. Bond funds :
These Bond fund invest in bonds and other debt. These funds invest in fixed income. You can classify according to bonds. In addition, these bonds are fixed by maturity. Mainly, These investments are in government, corporate and convertible. It is like mortgage secured securities.
3. Equity funds :
These equity funds are invested in common stocks. You may focus on companies of stock market. These stocks come from industries or countries. The companies are calculated on market price of stock. But these funds grow faster than money market. It has higher risk that you can lose money.
4. Hybrid funds :
These funds are characterized by portfolio. And it is mixed with stocks and bonds. It remains fixed. And it is categorized into domestic and international fund. It also knows as Balance funds or asset allocation funds. They invest in other mutual fund.
Benefits of Mutual Funds :
1. You will be provide with many stocks.That will diversify your portfolio. It will diversify instant. It gives low risk. You can see it effect for smaller accounts. Since mutual fund provides exposure also. For hundreds and thousands of stocks. Therefore, you need not go out.
2. You can buy hundreds or thousands of stock by own. So you will get profit from smaller investment. These funds will give you good service. You feel convenience.
3. Apart of this, government regulates all mutual funds. Therefore, all mutual funds must give same information to investor. Because to compare easily. Check advantages and disadvantages of Mutual Funds.
Draw Back of Mutual Funds :
1. You can find few hidden chargers in mutual fund. If you sell mutual fund. Because after sale only you have access to cash. Means, you need to wait for three days after sell.
2. You need to understand both good and bad points. If you buy or sell mutual fund. Therefore, you find transaction will take place at market close. It is simple, easy and stress free investment.
3. The government is not responsible for losses. No guarantee on returns. It depends on market. Some of these expenses are charged on ongoing basis. The portfolio diversify helps in minimize of risk. It’s hard to show higher returns.
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