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Mutual Funds
Investments that will make you grow
Welcome to VPN FINCAP
What Is A Mutual Fund?
A mutual fund pooling the savings of multiple participants who have a shared financial purpose is called a mutual fund. The funds thus raised are then invested in the capital market, where securities such as shares, debentures, and other financial instruments are bought and sold.
As an investor, you can partake in the income and capital appreciation achieved through these investments since they are divided among their unit holders in proportion to the number of units possessed by each. An asset management fund like a mutual fund is an excellent investment choice for the average investor since it offers the option to invest in a diverse basket of professionally managed assets at a cheap cost.
An excellent investment tool for folks who would rather not have to scrutinise the financial statements or assess if a stock is a worthwhile investment.
Know the reasons why you should invest in mutual funds
Advantages of Mutual Fund?
Professional Management
A mutual fund is managed by full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments. A fund manager continuously monitors investments and rebalances the portfolio accordingly to meet the scheme’s objectives. Portfolio management by professional fund managers is one of the most important advantages of a mutual fund.
Risk Diversification
Buying shares in a mutual fund is an easy way to diversify your investments across many securities and asset categories such as equity, debt and gold, which helps in spreading the risk - so you won't have all your eggs in one basket. This proves to be beneficial when an underlying security of a given mutual fund scheme experiences market headwinds.
Liquidity
You can easily redeem (liquidate) units of open ended mutual fund schemes to meet your financial needs on any business day (when the stock markets and/or banks are open), so you have easy access to your money. Upon redemption, the redemption amount is credited in your bank account within one day to 3-4 days, depending upon the type of scheme e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount is paid out the next business day. However, please note that units of close-ended mutual fund schemes can be redeemed only on maturity.
Low Cost
An important advantage of mutual funds is their low cost. Due to huge economies of scale, mutual funds schemes have a low expense ratio.
Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses, etc. The limits of expense ratio for various types of schemes has been specified under Regulation 52 of SEBI Mutual Fund Regulations,
1996.
Affordability & Convenience
For many investors, it could be more costly to directly purchase all of the individual securities held by a single mutual fund. By contrast, the minimum initial investments for most mutual funds are more affordable.
Tax Benefits
Investment in ELSS upto ₹1,50,000 qualifies for tax benefit under section 80C of the Income Tax Act, 1961. 80C being the most famous, there are other deductions which are beneficial for the taxpayers to reduce their tax liability.
Well-Regulated
Mutual Funds are regulated by the capital markets regulator, Securities and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996. SEBI has laid down stringent rules and regulations keeping investor protection, transparency with appropriate risk mitigation framework and fair valuation principles.