What is a Mutual fund…
- A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.
- The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.
- The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them.
Advantages of Mutual Funds
Types of Mutual funds
No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
Mutual funds can be classified on three parameters:
- On the basis of structure.
- On the basis of investment objective.
- On the basis of special schemes.
Organization of a Mutual Fund
- Systematic Investment Plan (SIP) Invest a fixed sum every month. (6 months to 10 years- through post-dated cheques or Direct Debit facilities)
- Fewer units when the share prices are high, and more units when the share prices are low.
- Convenience and Discipline are the benefits of SIP.
Systematic Withdrawal Plan (SWP)
- Is a facility provided by a mutual fund to withdraw money on a regular basis.