What is Mutual Fund?

A mutual fund is when people put their money together to invest in stocks and bonds and other assets. A professional manager chooses where to invest the money, with the goal of making a profit for the investors. The money earned from the investments is shared among all the people who invested in the fund.

Key aspects of Mutual Fund investing

Mutual funds provide investors with a multitude of investment opportunities. However, as an investor, you need to be aware of crucial facets of mutual funds before beginning your investment journey

Investment and your Goal:

Every mutual fund scheme, regardless of its category or sub-category, has a defined investment objective that drives its strategies and investment approach. Investors should ensure that the scheme’s objective aligns with their own financial goals to enhance their chances of achieving better returns. For example, if the goal is to save for retirement in 20 years, equity funds could be a good fit, as they typically require a longer investment horizon to realize their full potential for wealth creation.

Returns are not guaranteed:

Mutual funds do not offer guaranteed capital protection or fixed returns. This holds true not just for equity funds, but for other types of mutual funds as well. The primary goal of investing in mutual funds , particularly equity-oriented schemes, is to generate returns that outpace inflation. To achieve this, these funds invest in various markets, each with its own set of rules and dynamics, which inherently involves taking on certain risks. The underlying risk could be the potential loss of returns or even capital.

What Do you Pay:

When investing in mutual funds, it's essential to pay attention to both the expense ratio and exit loads. Exit load is the fee imposed when you sell your mutual fund units within a certain period. Since it's based on a percentage of the NAV, it reduces the overall value of your investment. The expense ratio represents the fee for managing the fund's investments.

Past performance is not a guarantee of future returns:

Based on your investment decisions solely on the historical performance of a mutual fund can be problematic. While selecting a fund, it's important to look beyond past performance and evaluate other factors that align with your financial goals. Remember, past returns do not guarantee future results. Once you've made your choice, it's essential to regularly review your fund's performance and make necessary adjustments if its returns consistently deviate from your financial objectives.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.