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What Is Mutual Funds Investment ?

What Is Mutual Funds Investment ?

By Asit C. Mehta

Mutual Fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks.It is a trust registered under the India Trust Act & is initiated by a sponsor, who acts alone or with a corporate to establish a mutual fund. Mutual funds I nvestment is considered to be the best stepping stone to the stock market. There are basically two methods of investing in Mutual Funds, by One time outright payment, where you invest directly in the fund & you get your fund units depending on the value of the units on that particular day.

Second method is by Periodic Investment(SIP), wherein every month you commit to invest an amount on different NAV (Net Asset Value) & in return get different units each month depending on the value of NAV. Higher the NAV lesser units you get & vice versa. In mutual funds investment, money is invested on a diverse portfolio and a constant check is kept on the growth and fall of the different securities in which the funds have been invested. The portfolio of a mutual fund is designed in such a way that individual investments will react differently to the same economic conditions.

Different types of Mutual Funds available are Closed end funds, Open end funds, Large cap funds, Mid Cap funds, Equity funds, Bond funds, Growth funds, Balanced funds, Value funds & many more.

Investors can directly approach the parent firm running the mutual fund scheme or can also invest through stock brokerage companies & can also be purchased from stock exchange platforms also. The trading account with the broker can be used for this.

Advantages of investing in Mutual Funds are:

* Assistance of professional management.
* Diversification of funds.
* Convenience in administration.
* Lower transaction cost
* Transparency & liquidity.

Online Mutual Funds Investment- Most companies and banks that are in the mutual funds business facilitate online buying of mutual funds to their customers. They need you to have a trading as well as a demat account and connect your bank account to this. You can log on to a broker's or the company's own trading internet portal to be able to buy online. Once online you can choose from the array of exchange traded mutual funds (ETF) and open end funds too. Your trades will be either credited or debited to your demat account (an account to hold dematerialized shares - electronic form of shares) instantaneously.