How to invest in Mutual Fund, its advantages and disadvantages

 How to invest in Mutual Fund, its advantages and disadvantages

The deposits made by a large number of investors are called mutual funds which are put into a fund. The fund manager uses his investment management skills to invest this money in various financial instruments. Mutual funds invest in several ways that determine their risk and return. Here, understand what are the direct plans in mutual funds.








How Mutual Fund works























Mutual funds are operated by professional fund managers, i.e. professional managers, who invest the assets of the fund in such a  way as to generate capital gains or income for the investors of the fund. The portfolio of a mutual fund is made according to the investment objectives stated in its prospectus.









Investment gap between Shares and Mutual Fund

Investing in units of mutual funds is different from investing in shares. The rights of shareholders include the right to vote, but in contrast mutual funds do not give any voting rights to their unitholders. A stock of a single company can be purchased to invest in shares, but a unit of a mutual fund is part of an investment in several different shares (or other securities). Shares can be sold or bought during market hours and their prices fluctuate during market hours, but their NAVs are fixed at the end of each trading day






NAV


The price of a mutual fund unit is known as Net Asset Value (NAV) per unit. The fund's Net Asset Value is calculated by dividing the total value of securities in the portfolio by the total number of outstanding units. Mutual fund units can usually be bought or sold at the current Net Asset Value of the fund.






Benefits of Mutual Fund

A small investor who is not able to make big investment gets the facility to invest in small units. Apart from this, their biggest advantage is that an investor who does not know much about the market, leaves his investment in the hands of experts. Experts determine where, how and when to invest. Read here in detail all the benefits of mutual funds.









Where to invest

Mutual funds invest in many ways. The most prominent are bond and stock markets. Apart from this, you can invest in gold and other commodities. There are many types of funds which are known according to their investments. The main ones are debt funds, equity funds and balanced funds. Balanced funds are also called hybrid funds. The most diversified is found in equity funds. Also know which are the top mutual fund schemes to invest.









Why Mutual Fund is the Investor's Choice

In recent times mutual funds have emerged as an investment option very quickly and more and more people are investing in it. The main reason is that it is easy to invest in these schemes

Mutual Fund is a very good option to invest in banks where interest is becoming less. If invested for a long time, it can become a means of getting the highest return on investment.








Disadvantages of Mutual Fund

Liquidity, diversification and professional management attract a small and novice investor to mutual funds. However, no investment is without drawbacks and hence mutual funds also have their drawbacks. Like share prices, the NAVs of their units also fluctuate. Although their investment is driven by professional managers and may be better than returns from ordinary investors and market returns, returns on investment in mutual funds are not guaranteed and can be influenced by market risk. Read how much the risk in investing in mutual funds is on our site in detail.