Mutual funds Sahi Hai

Definition: A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities.

Description: As an investor, you can buy mutual fund ‘units’, which basically represent your share of holdings in a particular scheme. These units can be purchased or redeemed as needed at the fund’s current net asset value (NAV). These NAVs keep fluctuating, according to the fund’s holdings. So, each investor participates proportionally in the gain or loss of the fund.

All the mutual funds are registered with SEBI. They function within the provisions of strict regulation created to protect the interests of the investor.

The biggest advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.

What is the benefit of staying invested in the long term?

Invest for long term – an advice routinely given by many Mutual Fund distributors and investment advisors. This is especially true in case of certain Mutual Funds – such as equity and balanced funds.

Let us understand why the professionals give such advice. What really happens in the long term? Is there a benefit of staying invested for long term?

Consider your Mutual Fund investment as a good quality batsman. Every good quality batsman has a certain style of batting. However, each good quality batsman would be able to accumulate lots of runs, if he continues to play for years.

We are talking about the record of a “good quality” batsman. Every good batsman would go through some good and poor performances. On average the record would be impressive.

Similarly, a good Mutual Fund would also go through some ups and downs – often due to factors beyond the control of the fund manager. An investor would benefit if one stays invested through these funds for long periods of time.

So, as long as you can afford, stay invested for long periods of time – especially in equity and balanced funds.

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