MUTUAL FUNDS — What it is all about? (PART 1)
Nowadays, we all are bombarded with messages every single day asking to invest the money. Be it your family, friends, online, or ads — Everyone has one common message ‘You need to start investing ASAP’. But with endless options available, how can one select which way to go? Let’s treat you with an example:
It’s time to sit on a time machine and roll back to the year 2007. Your plan is to invest a small amount of money so that you get rich in the present day. Therefore, you end up investing 1 lakh INR each in gold, in equity mutual funds, and in a fixed deposit.
10 years succeeding, you decide to withdraw ‘that’ money. You’ll get 2.85 lakh INR from gold, 3.85 lakh INR from mutual fund investments, and 1.92 lakh INR from a fixed deposit, after taxes*.
A Quick Question to Yourself: If you were to invest at present, which option would you choose? Taxation or mutual funds with better tax efficiency and high returns and gold and FDs with low returns? Take your time and then choose. No hurry!
Back to the Grind — What is a Mutual Fund?
A mutual fund is an investment product that pools money from people and later invests it in a vast variety of bonds, stocks, and other investments. All together, they are managed by ‘fund managers’, who are experts at managing investments and money.
The mutual fund is a road that helps you in building wealth with ease. All you need to do is invest your money in the selected fund and rest everything will be taken care by the fund manager.
Have a moment to consider an example?
Investing in bonds and stocks on your own is like driving your vehicle; you have full control, still, you need to pay the attention to the road. Also, you need to pay for maintenance, repairs, fuel; not to forget you need to buy the car by yourself and nothing comes cheap.
On the other hand, investing in mutual funds, is just like taking a shared cab from your favorite cab service. Although, you don’t have a full control, you don’t need to worry about driving, car maintenance, figuring a route and it’s cheaper. Precisely, your driver (similarly, like a fund manager) will take care of everything without any hassle.
On that note, if you invest in a mutual fund, you end up enjoying great comfort and less stress. When are you planning?
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.