Mutual funds make saving and
investing simple, accessible, and affordable. The advantages of mutual funds include
professional management, diversification, variety, liquidity, affordability,
convenience, and ease of record keeping—as well as strict government regulation
and full disclosure.
Professional Management: Even under the best of market conditions,
it takes an astute, experienced investor to choose investments correctly and a
further commitment of time to continually monitor those investments. With
mutual funds, experienced professionals manage a portfolio of securities for
you full-time, and decide which securities to buy and sell based on extensive
research. A fund is usually managed by an individual or a team choosing
investments that best match the fund’s objectives. As economic conditions
change, the managers often adjust the mix of the fund’s investments to ensure
it continues to meet the fund’s objectives.
Diversification: Successful investors know that diversifying their
investments can help reduce the adverse impact of a single investment. Mutual
funds introduce diversification to your
investment portfolio automatically by
holding a wide variety of securities. Moreover, since you pool your assets with
those of other investors, a mutual fund allows you to obtain a more diversified portfolio
than you would probably be able to comfortably manage on your own—and at a
fraction of the cost. In short, funds allow you the opportunity to invest in
many markets and sectors. That’s the key benefit of diversification.
Variety: Within the broad categories of stock, bond, and money
market funds, you can choose among a variety of investment approaches. Today,
there are about 48 mutual funds available in the India with goals and styles to
fi t most objectives and circumstances.
Low Costs: Mutual funds usually hold dozens or even hundreds of
securities like stocks and bonds. The primary way you pay for this service is
through a fee that is based on the total value of your account. Because the
fund industry consists of hundreds of competing firms and thousands of funds,
the actual level of fees can vary. But for most investors, mutual funds provide
professional management and diversification at a fraction of the cost of making
such investments independently.
Liquidity: Liquidity is the ability to readily access your money in
an investment. Mutual fund shares are liquid investments that can be sold on
any business day. Mutual funds are required by law to buy, or redeem, shares
each business day. The price per share at which you can redeem shares is known
as the fund’s net asset value (NAV). NAV is the current market value of all the
fund’s assets, minus liabilities, divided by the total number of outstanding
shares.
Convenience: You can purchase or sell fund shares directly from a
fund or through a broker, financial planner, bank or insurance agent, by mail,
over the telephone, and increasingly by personal computer. You can also arrange
for automatic reinvestment or periodic distribution of the dividends and
capital gains paid by the fund. Funds may offer a wide variety of other
services, including monthly or quarterly account statements, tax information,
and 24-hour phone and computer access to fund and account information.
Protecting Investors: Not only are mutual funds subject to
compliance with their self-imposed restrictions and limitations, they are also
highly regulated by the SEBI (Securities & Exchange Board of India). A
mutual fund is required to be registered with Securities and Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds
from the public. As part of this government regulation, all funds must meet certain
operating standards, observe strict anti fraud rules, and disclose complete
information to current and potential investors. These laws are strictly
enforced and designed to protect investors from fraud and abuse.
