Mutual Funds

Given the present scenario, bank deposits offer low returns. Chances are that most of your savings reside in bank deposits. Post income tax and inflation, it is likely that you will be left with little or no gains. In short, the money you have worked very hard for has failed to do the same for you. But there's a way to make your money earn enough to beat inflation while it earns you worthwhile returns – diversification. And, the simplest way to diversify your investments is to begin investing in mutual funds.

What is a mutual fund?

Simply put, a mutual fund is nothing more than a coming together of a group of investors like you who contribute different sums of money to make up a large lump sum. The money collected is invested by the fund manager in stocks, bonds and other securities - across companies, industries and sectors and in some cases, across countries as well. As an investor, you are issued units in proportion to the money invested. Since you own units of the fund, it makes you less reliant on the success or failure of any individual stock, which would have been the case if you had invested directly in the shares of a single company.

Is it really that simple?

Yes that's the long and short of mutual funds! What's even more heartening to know is that the analysis and strategic thinking that goes into investing is not your worry. That's what a fund manager does for you

10 reasons to invest in mutual funds

Expert on your side:   When you invest in a mutual fund, you buy into the experience and skills of a fund manager and an army of professional analysts

Limited risk: Mutual funds are diversification in action and hence do not rely on the performance of a single entity.

More for less: For the price of one blue chip stock for instance, you could get yourself a number of units across a number of companies and industries when you invest in a fund!

Easy investing: You can invest in a mutual fund with as little as Rs. 5,000. Salaried individuals also have the option of investing in a monthly savings plan.

Convenience: You can invest directly with a fund house, or through your bank or financial adviser, or even over the internet.

Investor protection: A mutual fund in India is registered with SEBI, which also monitors the operations of the fund to protect your interests.

Quick access to your money: It's good to know that should you need your money at short notice, you can usually get it in four working days.

Transparency: As an investor, you get updates on the value of your units, information on specific investments made by the mutual fund and the fund manager's strategy and outlook.

Low transaction costs: A mutual fund, by sheer scale of its investments is able to carry out cost-effective brokerage transactions.

Tax benefits: Over the years, tax policies on mutual funds have been favourable to investors and continue to be so.