What is ‘Mutual Fund’?

Mutual fund is a pool of funds created through savings of many investors and the entire money is invested in equity or debt markets. Many of us might be aware of the popular tax-saving options like Public Provident fund (PPF), Employees Provident Fund (EPF), Bank Fixed Deposits, Unit Linked Insurance Plans (ULIPs), National Savings Certificate (NSC) and other. But, Mutual Fund is more popular now because of some great benefits out of it over the others like diversification, professional management and liquidity.

How to Select a Mutual Fund?

Before selecting any mutual fund, you must first consider the two important factors viz. risk and time horizon. If you are willing to take high risk with long time horizon then go for equity funds and if you have low risk appetite with short time horizon then go for debt funds. Over the risk and time horizon following other factors also play important role:

Fund Manager Experience
A personal fund manager is associated to manage your mutual fund and thus it is important to know past record of your fund manager notifying his investment skills and knowledge.

Check the previous portfolio of mutual fund you wish to invest in like is it getting high returns, how debt equity split is managed, where it investing etc.

Expense Ratio
If expense ratio of your mutual fund is high, it will directly cut down your returns affecting your wealth creation potential. So don’t forget to check expense ratio before selecting any mutual fund.

Best Benefits of Mutual Funds

Why you invest your money? Surely expecting a good return! Right ! If mutual funds can assure you highest return on investment, will you go with it? Most of You Will. Mutual funds invest mostly in equity markets thus they have potential to offer higher returns. Hence mutual fund is the best way to save tax as well as gain higher returns.

People take risk fully or not at all. Investors who are risk seekers always looking for equity investments. Mutual fund gives 80-100% exposure of your funds into equities.

Through knowledge and discipline, financial peace is possible for all of us. In mutual fund, investing small amounts regularly on monthly basis lowers liquidity pressure at the end of financial year. This habit of saving and investing takes you towards financial goals in a stepwise manner.

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