When it comes to earning everyone wants to earn from their saving and so they always look for a good option for it. Investment in today’s world is gaining more and more popularity. It is easily believed that investment in anything helps us earn a lot. But Investment is a common term to define your involvement in market i.e. if you simply say you want to invest in the market it is not enough. A lot of question arises there like, which type of investment, where to invest and many more. These things make investment more complicated and seeing the complexity people try to run away, as a simple question comes to their mind “what if a wrong choice is made and they end up in losses”. So it is necessary to know what actually investment is and which best type of investment is.
Market is reliable on its customers as well as investors, and it is necessary to make them happy so that they continue to show their interest in the market. To run the market smoothly it is necessary to involve customers and investors. To do so the market is designed for all so that everyone who wants their involvement in the market can involve themselves according to their need. Now it is the responsibility of customer and investors that they understand all type of investment and choose from it.
Of all type of investment, a name called Mutual fund investment is having a special place in market. If we look for the definition then Mutual fund is defined as “ A group of people coming together with a common investment objective and further the money invested is used in bonds, equities and other securities, and then the profit made through it is divided proportionality among all.”. It can be defined in another form as “Professionals collect money from investors and invest them on their behalf, the profit generated is divided among all”. Company strategy to earn profit is simple they reinvest the profit again and again and earn through it, this process is called dividend and the money earned through it is divided among the investors.
ADVANTAGES OF MUTUAL FUND
The market is large enough to confuse, at the same time it helps us to give wide range of investment option all we have to give effort to manage it.
- PROFESSIONAL MANAGEMENT
Some of the over-confident investors who are not having good knowledge of investment always ends up in losses. SO it is necessary to give your investment to some professionals so that they can utilize your money at perfect place to make you earn profit.
Cost is very less when it comes to mutual fund, it is just of (1-2) % in the form of equity fund, in case of debt mutual fund it is even lesser.
All the data are easily available to you, all you have to do is to continuously analyze, the dealer allows you to do so. This is important as it will help you to compare your portfolio with various parameters such as risk management, return, and price.
Mutual fund investment is a subject to market regulation that ensures accountability and fairness to the investors.
DIFFERENT TYPE OF MUTUAL FUND
There are various type of mutual fund available in market, let us get detail explanation about them.
- EQUITY FUND
One of the most interesting type of mutual fund, it is so said because in this type of mutual fund you can easily buy a ownership in any of your favorite company and when the company will make profit you will also earn. Equity funds are either Active or passive, In case of Active funds the fund manager looks for the best stocks to invest while in case of passive investment, the fund manager creates a portfolio that mirrors a popular market index.
- DEBT FUND
It is another form of mutual fund, these type of investment deals with fixed income securities like bonds, money market instrument. It is also called income fund or bond fund. These are risk less investment and are better for those who wants less risk in their investment. Profit is less as compared to equity but you will earn these money in tax efficient manner. So overall debt fund is tax efficient, gives steady income and is less volatile so is less risky.
- MONEY MARKET FUND
Another safe form of mutual fund, it is quite different form of mutual fund as it don’t deals in stocks. This type of investment deals in Loans, treasury bills and there is a prematurity period for this which is usually 1-270 days. This is considered as the safest one because the debt is given in safe hand and also if you feel the market is going down you can sell it at a reasonable profit.
- INDEX FUND
Another form of mutual fund, in this type of mutual fund the index of share market is copied. For ex: – UTI nifty mutual fund, this mutual fund copies index of nifty and hence the price value of this market varies according to that. These are passively managed fund and the skill of fund manager are not used in this as the value is depended on something else.
- BALANCE FUND & INCOME FUND
Balance fund is a hybrid fund and is basically combo of Equity and debt fund. The percentage of equity is 70%-80% whereas that of debt is (20-30) %. Whereas in income fund the debt fund is (80-85) % and equity fund is (10-15) %. This type of fund is beneficial as the market is not always constant but it will not matter to you if you are having hybrid form of fund. If you are facing loss from one side the form will help you to manage it. Though the profit is less, it is assured that you get steady income and never ends up in loss.
- SPECIALITY FUND
In this type of mutual fund the investment is done in securities of the industry, sectors and particular region. To be a part of specialty fund one should invest 25% in a particular sector.
Mutual fund is a subject to market risk. But having proper knowledge about the subject helps in achieving the financial goal in the most efficient manner.