Mutual fund of financial vehicle of money collect & money invest like a bond , money market, & instrument. Mutual fund give small individual of investor to professional manage at minimum price. Mutual fund are charged annual fees and in commission are affect overall return.
How to Mutual Fund work.
Mutual Fund an investment both an actual company. Mutual fund sell securities the increase of fund of capital gain .Mutual Fund is constructed virtual company is fund manager & investment adviser. fund manager are owner of fund. Fund manger are hired by the board of director. Mutual fund need to have officer to the compliances officer probably of attorney with government regulation.
Type of Mutual funds.
Mutual Fund are normally three types.
1). Equity & growth Fund : primary objectives is wealth creation or capital appreciation. the potential to generate higher return 7 best long term investment.
2). Income or bond & fixed income fund : The investment in fixed income securities , bonds, commercial paper, govt. securities, treasury bill etc. these are safer investment 7 suitable income generation.
3). Hybrid fund : Hybrid fund are combination of equity & debentures target at a different type of investment.
Mutual Fund fees
Mutual fund investment into annual operating fees & shareholder fund. Annual fund operating fees annual percentage of fun usually for 1 to 3% . Fund expenses ratio of the advisory management fees & administrative cost.
Advantages of mutual fund
Mutual fund of advantage of retail investor vehicle of choice. Multiple mergers have equated to mutual fund overtime.
Professional Management : Mutual fund are manage of professional manager.
Cost efficiency : Mutual fund are cost efficiency of investment.
Higher liquidity : Mutual fund is higher liquidator to investor convert into the cash. investor are enter or exit without any restriction.
Safety (Risk Reduction) : Mutual fund is risk reduction investment anywhere different securities depend on focus.
Tax benefit : Tax benefit investor to under section 80c deduction 1.5 lakh in tax saving in mutual fund.
Disadvantage of mutual fund
Management fees : Investor need pay to fee fund manager of the management services.
Lock in period : mutual fund locked in long period 4 to 6 year.
No guarantee on return : Mutual fund are no guarantee on return of investors. mutual fund investment are market risk.
. Over diversification : Diversification may result in the spreading of risk but return can not the maximize. Management of over diversification of become quite difficulty.