Mutual funds are operated by expert money managers, who allocate the fund’s assets and try to produce capital gains for the fund’s investors. A Mutual fund’s portfolio is organized and maintained to match the investment goals stated in its prospectus.

Mutual funds give access to professionally managed portfolios of equities and other securities. Each shareholder participates proportionally in the gains or losses. Mutual funds invest in various protection, and performance is usually tracked as the change in the total market cap of the fund.

Investors should avoid the temptation to review the fund’s performance each time the market falls or jumps up significantly. Instead, for an actively-managed equity scheme, you should have patience and allow some time (around 18 to 24 months) for the fund to generate returns.

While investing in a mutual fund, you pool your money with many other investors. Mutual fund issues “Units” against the invested amount at the prevailing NAV. Gains from a mutual fund may include income distributions to investors out of dividends, interest or other income incurred by the mutual fund. Investors can also have capital gains (or losses) if they sell the mutual fund units for more (or less) than their investment.

Mutual funds are ideal for those investors who – Lack of the skill or experience of investing in stock markets directly; they want to build their wealth but are not inclined to research the stock market; wish to invest only small amounts.

As investment goals differ for different people – money for children’s education, marriage, house purchase, etc. – the investment products required to attain these goals also vary. Mutual funds offer several distinct merits over investing in individual securities. Mutual funds provide numerous choices for investment across equity shares, corporate bonds, government securities, and money market instruments, providing an ideal path for retail investors to participate and benefit from the uptrends in capital markets. The main benefits are that you can invest relatively low in various securities and leave the investment decisions to a professional manager.

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