What Is a Mutual fund?
Do you know about Mutual funds? If no then, let’s take a very simple example of this to assume that I want to go from Pune to Mumbai.
I have two options I can take my own car because I know how to drive and what way I have to choose. I know what is the basic rule so I am a well-educated person as per driving.
So I can choose how to drive which way to go and how to go… Possibility No. 2 I don’t know driving at all but I want to reach Mumbai. That’s my only goal so what I can do is I can just hire a driver in short hire a professional.
He takes the decision of which way to choose how to drive and everything. I keep all the decisions and responsibilities on his shoulder. I just told him the final destination.
That is the difference between a direct stock market investment and a mutual fund investment. In stock market investment you have to take the decision, you know where you have to go, How to go & Everything because You have the expertise in that.
But if you are in the second category you don’t have expertise So what you can do is you can hire a professional means, Mutual Fund. Because there is a manager who takes all the decisions on your own money which is invested in the mutual fund.
It is a basket of stocks it is a professionally managed investment scheme run by an assets management company. A group of experts invests our money in stocks, bonds, and other securities.
Why is Mutual Fund Important for Everyone?
I think you all know about inflation. So tell me what is inflation? Inflation is the change in purchasing power of money, reflected in a general Change in the prices of goods and services in the economy.
Every year there is near about a 6 to 7% increase in inflation in our country. Let us assume that you have 1 Lakh INR in your bank account (Savings) usually saving accounts give near about 2 to 3% yearly interest.
So after one year, you will think that you have earned the interest of 2 – 3% but you are wrong my friend. because of inflation, you are in (-)3 to 4% and think that you have got an idea of how inflation is increasing day by day. So, if you wanna be a wealthy person in your life so you have to invest your money.
Let’s talk about FD (Fixed Deposit) now today FD gives about 5 to 6% of interest per annum. So if you invest your money in FD it can bit inflation your money will not grow too much and you will not lose your money.
FD & Inflation bits each other which means both ka the same. By Investing in FD don’t be too happy that you are getting 5 to 6% of interest per annum. Your money is not growing at all it is just biting the inflation and nothing else.
Mutual Funds for beginner
So for a beginner, I think a mutual fund is the best option to grow your money Because its average return is 10-15% per annum so it’s a very good investment for a beginner & is not too risky Everyone can invest in Mutual Fund You can do monthly SIP or you can do a lumpsum investment both are good but I prefer that start with monthly SIP it will be best for you.
SIP Means Systematic Investment Plan. It helps the investor to invest in this Discipline Manner. It gives us the facility to invest in it a fixed amount of money on a pre-defined date as a selected plan.
I think you got a clear idea of why is mutual fund important for everyone.
Assume that there is a pool of thousands of people who contribute some money to the mutual funds. this will reinvest this money into different investment opportunities Like a Mutual Fund can invest in equity and can invest in debt, it can invest in either or both depending.
In short, this is nothing but a company that takes money from people like you and me & creates a pool of funds and this pool of funds will be invested in different Investments opportunity.
So What is the positive side of the mutual fund? the positive side of this Is that they invested in different investments. This will earn income from that the income can be in form of interest. This is in form of dividends, or in form of gains.
So that means mutual funds have earned money out of his investment. Then what this will do? It will distribute the income to those thousand people who have invested their money in this fund. So this is the basic example for you all.
So now I think you have got a clear idea of Why it is important, and why you all should invest in that fund.
The Best Part is that whenever you want you can redeem your investment. It will be credited to your bank account in 1-2 working days. If you invest in any other opportunity like Real estate you will not get this flexibility.
Also in FDs If you break your FD before maturity then you have to pay a certain amount of money. You will not get the interest as promised. But In Mutual Funds, it’s not like you can withdraw your own hard-earned money from anything you want. So that’s the main reason I recommend investing in Mutual Funds for all people.
You can invest in mutual funds through various platforms. But I prefer Groww it is very easy to use and very simple. So, you can start your investing journey through Groww. This is not a Paid shoutout its an honest review
Thank you.
