Planning to invest in mutual funds, here are the things you should know

Today the world is buzzing with a new investment idea - mutual funds! The ads which lure us to invest in these funds but also gives the mandatory warning of SEBI in the end serves to do two things at the same time- attract us to invest in hopes of higher returns , but also makes us skeptical if market goes wayward.

So what to do? How to know whats right. Let us try to help.

So first things first- what is a mutual fund.
Mutual funds could be understood as an investment vehicle which pools money from a large number of investors who share a common investment objective. And these investments are managed by professional investors who invest in different types of securities ranging from govt bonds to equities, shares, money market instruments an so on. The investors get returns in proportion of their investments made . These returns are calculated from the schemes net asset value or NAV.

Now let's look into the pros and cons of mutual funds.

Pros :

• No expertise needed :                                             you do not need to be an expert in trading as all of your funds are to be managed by experienced professionals .
• Diversified portfolio :                                             as your funds are invested in different types of securities the concentration risk is minimised. That means if any sector underperforms then also the impact will not be severe.
• Liquidity :                                                               these funds are highly liquid i.e, most of these funds can be can encashed at any point of time at their prevailing NAV.
• Service and govt regulation :                              as the market is highly competitive and customer oriented so quality service is ensured. Also there is strict control of govt bodies like SEBI to prevent mal practices.

 Cons : 

The negatives are fairly reduced and are mainly limited to fee and expenses to be paid and some unforeseen downfall in market of large number of securities.

So investing in mutual funds is not a bad idea at all. You just need to know about the best type of mutual funds  that suits you needs and investment capacity. My advice is find a good investment plan , get registered and start investing today.