FinanceDogma – Finance, loans, creditcard and mortgages

January 2, 2009

Mutual Funds

Mutual Fund is an Investment Firm that raises capital through public and invests them in diversified financial instruments such as Stocks, Bond or Government Securities. The profit or loss accrued through such Investments will be shared by the Shareholders (Investors). Investment in Mutual Funds is a great option for Individuals who don’t have the knowledge in Stock Markets and also to earn more money than a typical Bank Savings Account or Certificate of Deposit.

Financial Knowledge

The Mutual Funds Investor need not bother about the Equity Market conditions after investing in Mutual Funds. The Asset Management Company (Mutual Fund firm) will have a group of fund managers who are experts in analyzing the Stock Market and invest the money of Investors wisely.

Better Returns

Mutual Funds have shown great results for Investors in the past. They offer good returns than Investments in Bank. Top Mutual Funds have generated 20 to 25% return in a year. Unlike Shares, the risk of loss is mitigated as the Fund Managers diversify the Investments which they predict to be more profitable.

Tax Savings Funds

There are many types of Mutual Funds. One such type is the close-ended Mutual Funds. Close-ended funds are those which can not be sold for a specific period from the time of purchase. The lock-in period may be 3 or 5 years depending upon the Fund Scheme offered. Closed-ended Mutual Funds offer tax benefits for its Investors. Although it is not possible to redeem your money once invested, many AMCs (Asset Management Company) offer the advantage of switching to a different scheme if you think the current scheme is not profitable.

Risk of Investment

Mutual Funds can also be classified as low risk, medium risk and high risk Funds. The Investor can choose the one that best suits his risk-appetite profile. Before buying any mutual fund, one has to assess the performance of the particular fund in the last 3 to 5 years. On the same time, one has to remember that past performance of a fund may not work the same way in the future years.

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