Share Market

With changing economic conditions, one has to plan his investments properly to have a contended life. Unforeseen expenses and future uncertainty could be unmanageable and thus investments have become a fundamental requirement for all of us.

Mutual Funds, being a good opportunity of investment have become very popular in the recent past. Mutual Funds are the portfolio of stock market shares and collection of other financial products, run by Government trusts, public and private financial institutions. The money is collected from various investors and the capital raised is then invested in various options like gold, bond, equity etc

Mutual funds vary in their investment objectives, thus providing you with the suppleness to create an investment plan based on personal financial goals. Investment experts advise growth investments such as equity funds and stocks as a good choice for funding needs that are five years or more away, income funds to fulfill medium-term needs and liquid funds for short-term requirements.

Now let us have a look at the advantages and disadvantages of investing in Mutual Funds.

Key Advantages:

Convenience- In case of most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be easily done by telephone, by mail, or online. Still, investors should always read the prospectus carefully before investing in any mutual fund.

Diversification- The risk is spread out by owning shares in a mutual fund instead of owning individual stocks or bonds,. The diversification helps to invest in a large number of assets so that a loss in any particular investment is minimized.

Professional Management: Mutual funds are managed and supervised by investment professionals. The mutual fund manager decides when to buy or sell securities. This eases the investor’s job and he gets a full-time manager to monitor his investments.

Low initial investment- Since, a mutual fund buys and sells large amounts of securities at a time, its transaction costs are very low.

Key Disadvantages:

Professional Management- Many investors are unsure about the performance of their fund managers. And, even if the fund loses money, the manager still takes his commission.

Costs – Tough financial jargons are associated with hidden costs! It is very difficult for general public to understand properly, what they are actually paying for!

Dilution – Dilution is the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

Taxes – Your personal tax situation is not considered by the fund managers, when making decisions about your money.