Mutual Funds: A boon to the small investor
Thanks to the advertisement “Mutual Funds Sahi Hai”, post this advertisement the base of retail Mutual Fund investors has gone multifold. People who do not have any knowledge about the Stock Market and Stock Investing also have started investing in Mutual Funds with ease. Yes, what you heard is right. For investing in Mutual Funds one doesn’t need any knowledge about the stock market or stock market operations. Then what are these Mutual Funds are and how will they benefit the investor. Let us look at it from a layman’s point of view.
The Stock Market is the place where the stocks or shares of different companies are traded. By investing, means by purchasing one particular company shares you will become a shareholder of that company, and based on the performance of that company the share value moves and thus gives you either profit or loss on that share. If the performance of the company is good and generating lots of profits then the share price of that company goes up and being a shareholder of that company your investment value is also appreciated.
On the other hand, if the company is not doing well and ends up making losses then the share price will go down and as well your investment value. So just by investing in company shares one cannot get rich or make money, to achieve that one should invest in the Right Company for which they should have sufficient knowledge about the industry in which that company operates, about the market of the products that company manufactures, financials of the company, past performance, future expectations, unique strengths, etc., etc.,
To study and analyze all these factors you should have sufficient knowledge, information, data, and time to do proper analysis. But a common man may not have that much expertise or knowledge to invest time and money in the stock market.
Will you believe if I say that there is someone else who will do all these for you? Yes, that is what exactly Mutual Fund does. In simple terms, Mutual Funds pool money from small investors like you and me and then deploy those funds in the Stock Market and other financial markets and managed by an experienced Fund Manager. These Fund Managers are experts in these fields and it is their full-time job to manage these funds in a much beneficial way to the investors.
These managers keep track of the performance of different companies, markets, products, etc., and will always be on top of the market-related news and action. Of course for delivering these services they do charge the investor but the charges are very minimal and are easily affordable by the investors. So, once you invest in the Mutual Funds instead of following the individual company shares in the stock market, you can simply follow the performance of the Fund in which you had invested.
Another biggest advantage is you can invest with small amounts of money also. You will be amazed to know that this small amount can be as small as Rs.100/- also. Yes, even with a small number of hundreds of rupees you can start investing in Mutual Funds whereas it is not possible in Stock Market.
For example, you want to buy shares of Company “A” and the present market rate of this share is 250 rupees then you cannot buy this share with 100 rupees as shares are not sold in the market infractions. But the same is possible with Mutual Funds because in Mutual Funds it is all about Units of the Fund and the Units are allocated infractions also. So if you invest in a Mutual Fund that is in turn investing in Company “A” shares means you are indirectly investing in that company’s shares.
So, in nutshell, Mutual Funds investment is ideal for small investors and for those who do not have the expertise or time to study the stock market and share movements but still want to participate in the amazing returns the stock market gives.