Mutual funds is a type of investment in which one will invest money in various programs through diversification which reduces the risk of investment and increases the return of investment.
Programs like Stocks, Money market instruments, Securities, Bonds, etc.
Let’s try to understand it in a simpler way
After getting salary every person saves a small amount from it, right?
maybe for emergency or to buy a home/ car can be any reason
what are the ways of saving?
well, most simpler way is
saving in a bank account
due to inflation, your money loses its value
As it is not generating interest in your account
people put them in different schemes
like FD (Fixed deposit), RD (Recurring Deposit), Gold, and Real Estate
some also invest in the stock market.
And every investment has three things
Return, Risk and Time
where RETURN always sees in percentage
and if the return percentage is below the inflation rate, it is considered a bad investment
if the return percentage is more than the inflation rate then it is considered as a good investment
RISK means how risky is the investment, will it return good or not
TIME means for how long you will invest to get returns.
if RISK and TIME in investment is higher then obviously RETURN will also Increase
That is why it is highly recommendable to invest in different schemes or programs
which eventually reduces the RISK factor.
because it’s not possible at the same time RD interest rate and gold return rate or real estate value falls simultaneously
This is known as SIP (Systematic Investment Plan)
MUTUAL FUND is an investment program operates by Asset management company helps investors like you and me to invest in various
programs by investing in a single program which is mutual funds