To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it
for you at its very basic level. Essentially, the money pooled in by a large number of people (or investors) is what makes up a
Mutual Fund. This fund is managed by a professional fund manager.
It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value or NAV.
Many of us dread the thought of managing our own investments. With a professional fund management company, people are put in charge of various functions based on their education, experience and skills.
As an investor, you can either manage your finances yourself, or hire a professional firm. You opt for the latter when:
You do not know how to do the job best – many of us hire someone to file our income tax returns, or almost all of us get an architect to do our house.
You do not have enough time or inclination. It’s like hiring drivers even though we know how to drive.
When you are likely to save money by outsourcing the job instead of doing it yourself. Like going on a journey driving your own vehicle is far costlier