Considering investing in mutual funds but do not know what it is about yet? If you are not aware of Mutual Funds and wonder why people around you are investing in them, you are at the right place!

This blog will explain what mutual funds are and why you can also start investing in them.

What are Mutual Funds?
Mutual Funds are pools of money collected from different investors who share the same investment objective. The money collected is managed by a professional fund manager who invests it in stocks, bonds or other assets.

The income or gains generated from this is then distributed accordingly amongst the investors after deducting any charges or levies.

The mutual fund manager's job is to produce capital gain or income for the fund's investors and all of the stocks, bonds, and other assets that a fund owns make up its portfolio.

A simple way to make you understand the concept is this: Suppose there is a box of 9 chocolates costing 30 Rs. Three friends decide to buy the same but they have only 10 Rs. each. Now, the shopkeeper only sells by the box. Naturally, the friends decide to pool in 10 Rs each and buy the box of 9 chocolates.

Now, based on their investment, they each get 3 chocolates. By Mutual Fund terms, each gets 3 units.

Therefore, the cost of each unit is 30/9= 3.33 and the initial investment is Rs. 10.

Hope this explanation gave you an idea of how a mutual fund works. Now, to answer your second question below:

Why do people buy Mutual Funds?
Mutual Funds are a highly sought investment option because of the following benefits they provide:

Diversification
Diversification refers to dividing your capital across several financial instruments so that you can minimise risk while maximising returns.

Mutual Funds usually involve investing in a range of companies across different asset classes and industries. A Fund Manager usually does this to diversify your portfolio and reduce your risk if your company fails.

Affordability
Mutual Funds keep a relatively low amount for initial investment. Since Mutual Funds can be bought through SIP investments, investors can make initial payments and subsequent purchases at a fixed amount.

Professional Management
When it comes to investing in different financial vehicles, it takes some knowledge and skill to do so. If you do not have much know-how about the market, the fund managers not only do the research for you but also select the securities.

Additionally, they keep track of their performance.

If you get a competent manager, they will take care of your money, select the best mutual funds in India and try to give you credible returns.

Tax Benefits
The Income Tax Act, 1961 allows you to claim a tax deduction up to Rs. 1,50,000 if you invest in ELSS funds (Equity Linked Savings Schemes). This is the only scheme that offers such a rebate provided that your investment is equal to or higher than 20,000 Rs.

The ELSS Fund has a three-year lock-in period, enabling you to withdraw money once the lock-in period expires.

Final Word
So, Mutual Funds are pools of money collected for investment purposes that also provide many financial benefits. If you are interested in investing in Mutual Funds and do not know where to start, you can turn to Goodwill Wealth Management.

They not only help you invest in the top mutual funds in India but also keep you updated on mutual fund news and mutual fund activity.

Choose Goodwill now to invest in the best mutual funds in India!