A mutual fund is a pool of money managed by a professional Fund Manager. Mutual funds are ideal for investors who either lack large sums for investment, or for those who neither have the inclination nor the time to research the market, yet want to grow their wealth. The money collected in mutual funds is invested by professional fund managers in line with the scheme’s stated objective. In return, the fund house charges a small fee which is deducted from the investment. The fees charged by mutual funds are regulated and are subject to certain limits specified by the Securities and Exchange Board of India (SEBI).

Mutual funds offer an excellent avenue for retail investors to participate and benefit from the uptrend’s in capital markets. While investing in mutual funds can be beneficial, selecting the right fund can be challenging. Hence, investors should do proper due diligence of the fund and take into consideration the risk-return trade-off and time horizon or consult a professional investment adviser. Further, in order to reap maximum benefit from mutual fund investments, it is important for investors to diversify across different categories of funds such as equity, debt and gold. While investors of all categories can invest in securities market on their own, a mutual fund is a better choice for the only reason that all benefits come in a package.

Systematic Investment Plan (SIP) is an investment route offered by Mutual Funds wherein one can invest a fixed amount in a Mutual Fund scheme at regular intervals– say once a month or once a quarter, instead of making a lump-sum investment. The installment amount could be as little as INR 500 a month and is similar to a recurring deposit. It’s convenient as you can give your bank standing instructions to debit the amount every month. SIP has been gaining popularity among Indian MF investors, as it helps in investing in a disciplined manner without worrying about market volatility and timing the market. Systematic Investment Plans offered by Mutual Funds are easily the best way to enter the world of investments

There is a beautiful Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.”There is no reason why one should delay one’s investments, except, of course, when there is no money to invest. Within that, it is always better to use Mutual Funds than to do-it-oneself. There is no minimum age when one can start investing. The moment one starts earning and saving, one can start investing in Mutual Funds. In fact, even kids can open their investment accounts with Mutual Funds out of the money they receive once in a while in form of gifts during their birthdays or festivals. Similarly, there is no upper age for investing in Mutual Funds.

Do you visualize roller-coasters or toy trains first when you think of an amusement park? Probably the former. These rides are usually the biggest attractions in such parks which create a certain perception about amusement parks. ‘Mutual funds’ too carry a similar perception that they invest only in stocks and hence are risky. There are many types of Mutual Funds meant for the varying investment needs of people. Some investors want high returns which only stocks can deliver. Such investors can invest in Equity Mutual Funds which are among the best long-term investment options available for achieving such objectives. But these Mutual Funds have risk of higher volatility because of their exposure to stocks of various companies.

There are other types of Mutual Funds that do not invest in equity but in bonds issued by banks, companies, government bodies and money market instruments (bank CDs, T-bills, Commercial Papers,) which have lower risk but also offer lower returns compared to equity funds. These funds are better suited as alternatives to traditional options like bank fixed deposits or PPFs. Hence if you are looking to invest your money that can give you better returns than a bank or post office FDs and still be more tax efficient, Debt Mutual Funds are a great way to achieve such financial goals.

Many of us dread the thought of managing our own investments. With a professional fund management company, people are put in charge of various functions based on their education, experience and skills.

As an investor, you can either manage your finances yourself, or hire a professional firm. You opt for the latter when:

• You do not know how to do the job best – many of us hire someone to file our income tax returns, or almost all of us get an architect to do our house.
• You do not have enough time or inclination. It’s like hiring drivers even though we know how to drive.
• When you are likely to save money by outsourcing the job instead of doing it yourself. Like going on a journey driving your own vehicle is far costlier than taking a train.
• You can spend your time for other activities of your choice / liking

Professional fund management is one of the best benefits of Mutual Funds. The info graphic on the left highlights all the others. Given these benefits, there is no reason why one should look at any other investment avenue.