Mutual Funds (mfs) Benefits

If I am not planning to invest in Fixed Deposits (FD) scheme, and I will preferred Mutual Funds (MFs) also known as Unit Trust. Mutual fund is an investment made up of a group money being collected from different investors for the purpose of investing in securities and legal team or organization such as stocks, bonds, money market instruments and other asset. Mutual funds are operated by professional and legal money managers, who help the investor allocate the fund’s investors. The unit of share can be purchased or redeemed as needed the fund’s current net asset value (NAV). NAVs keep changing according to the fund’s holdings which derived by aggregating performance this will affect the investor’s capital or income gain or loss.

I choose Mutual Funds (MFs) as my investment other than Fixed Deposits (FDs) is because MFs have the potential to earn high returns whereas FDs rates are unaffected. To be an fund investor won’t get any product from the company, actually investor are buying part ownership and asset from MFs company. Mutual Funds companies are selling government bonds, corporate bonds will get the pay of a fixed rate of return.

In the terms of risk, fixed deposits have minimal risk where mutual funds have the higher market risk. But the risks can be mitigated to a certain extend mutual funds are managed by professionals. Well mutual funds have the higher market risks, it also means it get higher return as well. Next, the liquidity for mutual funds are higher than fixed deposits because fixed deposits have a fixed time period as the name suggests, and generally have low liquidity till the tenure of the deposit ends. In case of premature withdrawals, fixed deposits holders have to pay a penalty, and miss out on a portion of the expected returns. MFs only charge an exit load if investments are withdrawn, in a very short period, normally under a year. Some MF Schemes offer high liquidity. Funds can be withdrawn at any given point of time, without any exit load or extra charges.

Next, some of the investors don’t have a lot of capital or cash but they still want to buy the investment to earn income or gain. Investment costs are low for Mutual Funds. These are the benefit to let those investors are not rich enough or don’t have a large number of cash. Some investors will aspect that the building or house is costing a lot of money from expense. The market price of the building are depending on the brokerage firm, the price all are included the charged commissions, up to hundred to thousand dollar. However, mutual funds can be significantly less expensive. A mutual fund manager will place the necessary trades to maintain the mutual fund portfolio but the investor may only be responsible for one low expense. Sometimes investors will facing some issues in investing become more expensive than buying individuals stock securities. Mutual Funds investors are preferred to buy no-load mutual funds with low expense ratios. Costs can also be minimized by investing with one of the best no-load MFs companies like Vanguard Fidelity.