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Understanding Mutual Fund Investment

A mutual fund is an investment scheme that offers you to invest in stocks, bonds, or other securities. Read onto this Finance Buddha blog to understand how Mutual Funds work

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Understanding Mutual Fund Investment

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  1. Understanding Mutual Fund Investment https://financebuddha.com/

  2. How Mutual Funds Work? • Mutual funds are operated by professional money managers, who are responsible for allocating the funds in order to make a capital gain from the fund invested.  • As an investor, you can buy mutual fund units, which represent your share of holdings in a particular scheme. These units you purchase can be redeemed as needed at the fund’s current net asset value (NAV). However, the NAVs keep fluctuating according to the market and fund’s holdings. So in order to make a profit, it is important to invest after properly analyzing the scheme. • However, Mutual fund investment has advantages and disadvantages both as compared to that of direct investing in individual securities. https://financebuddha.com/

  3. The Advantages of Mutual Funds include: • Economies of scale • Superior diversification • Liquidity • Flexible Investment • Fair pricing • Advanced portfolio (professional) management.  https://financebuddha.com/

  4. The Disadvantages of Mutual Funds include: • Tax inefficiency • Lock-in period • Fluctuating Returns • Poor trade execution. • high expense ratios • Needs research  https://financebuddha.com/

  5. Key Highlights of Mutual Funds • A mutual fund is an investment scheme that offers you to invest in stocks, bonds, or other securities.  • Through Mutual funds, you get access to diversified, professionally managed portfolios. • Mutual funds are divided into different categories, depending upon the kinds of securities one wants to invest in, investment objectives, and based on returns offered. • When investing in Mutual funds you need to pay annual fees (expense ratios) and commissions*(not in all schemes). https://financebuddha.com/

  6. Factors to consider before you decide to invest in Mutual Funds  • Investment objective • Time Horizon • Risk Tolerance • Fund Size https://financebuddha.com/

  7. Thank You! https://financebuddha.com/

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