What is Mutual Fund?

Mutual fund is a form of investment where your funds are managed by an expert. On average the returns are higher than fixed deposit, real estate or life insurance as your money is invested by an expert.

Mutual Funds make a great investment option because of the following reasons:

  • High Returns: Higher average returns than most other modes of investment (Actual returns vary based on scheme selected)
  • Liquidity: You can withdraw your investment at any point of time. You don’t have to wait for a buyer (like in case of property) or the term to get over (like in case of fixed deposit)
  • Security: There are many types of mutual funds. Certain funds invest in Govt. bonds and securities. This makes them as secure as Fixed Deposit
  • Full transparency: Unlike property market where true costs are not very clear, Mutual Fund have 100% transparency. You can monitor your invested amount and returns anytime, anywhere!
  • Tax Benefits: Any return from Mutual Funds (from any equity scheme where the amount was invested for 1 year or more) comes under Long Term Capital Gain and is exempted from taxes. On the other hand, returns from other forms of investments like Stock Trading, Fixed Deposit, Property attract numerous taxes like wealth tax, income tax etc.
  • Choose your own amount: You don’t need a large sum of money to start investing. You can start investing with any amount you have. You can even invest on a regular basis similar to recurring deposit
  • Partial Redemption: In most of the investments including Fixed Deposit and Property, you cannot take out partial investment at the time of need. With Mutual Funds you can take out whatever amount you need and keep the rest invested. For example if you own a property worth Rs. 50 lakh. You decide to purchase a car worth Rs. 5 lakh. There is no way you can take out 5 lakh from this property without selling the entire property. It is possible in mutual fund to take out 5 lakh and keep the remaining 45 lakh invested.
  • Minimal maintenance costs: Certain investments like property have a lot of maintenance involved. Mutual Funds have minimal maintenance. You can truly let your money do the work for you.