Investing in Mutual Funds

Table of Contents
Chapter 1: Growing Your Wealth with Investments
Chapter 2: Learn How To Invest
Chapter 3: Cash Investments
Chapter 4: Investing in Stocks
Chapter 5: Investing In Bonds
Chapter 6: Investing in Real Estate
Chapter 7: Investing in Mutual Funds

Investing in Mutual Funds

Mutual funds are the most preferred type of investment for the new age investor who wants to invest in stocks, bonds, real-estate etc – all at the same time. The easiest and the least stressful form of investment, a mutual fund can be defined as a pool of money put together by individuals, companies and financial organizations.

The mutual fund company uses this fund for further outlay in various investment options depending on the type of mutual fund. Evaluation of mutual funds is usually based on their net asset value (NAV) and the return that they have delivered in the last few years.

A mutual fund can be an open-end fund or a closed-end fund. An open-end fund does not have a limit on the number of shares and it can issue new shares or redeem existing shares from an investor who wants to sell. Closed-end funds have a limit on the number of shares and cannot issue or redeem shares because of which they are generally traded for less than their NAV.

Listed below are some of the common types of funds you can consider for investment.

  • Index funds – Index funds are passive funds that mirror the index they are linked to. These funds are convenient, cost effective and provide tax benefits – making them the most preferred by investors.
  • Growth funds – These funds invest in companies that are growing at a rapid pace. Investing in these funds can bring you quick returns when the company performs but can also bring you losses if the company fails.
  • Sector funds – By investing in these funds, you are choosing to invest in a particular sector of the market like the energy and power sector, financial sector etc.
  • Value funds – Value funds usually invest in companies whose stocks are undervalued. Such funds are mostly offered to individuals.
  • In addition to the above, you can also choose from Bond funds, Global funds and a variety of aggressive mutual funds like capital appreciation funds, small-cap funds etc.

    Mutual funds must be considered when you want to grow your wealth faster. But when you are investing in a high-returns fund, remember that you are also in the high-risk zone. So, make sure you select the right mutual fund depending on your risk profile and expected returns.