Mutual Funds

A mutual fund is a type of financial instrument which pools money from thousands of small investors and invests it in stocks, commodities, debt/bonds, and real estate. Mutual fund investors own certain units, which shows the ownership in that fund.

Why should you invest in mutual funds?

1. Expert management: Mutual funds are managed by professional fund managers who have rich experience in investing. An individual with no knowledge of investing should opt for mutual funds and let experienced managers manage their money.

2. Small ticket size: The minimum investment amount in a mutual fund is Rs. 100, and this may be highly feasible for investors who are not willing to shell out a higher amount.

3. Diversification: Mutual funds invest your capital across different asset classes and industries, which helps reduce the overall riskiness of the investment.

4. Lower costs: Investing in mutual funds is cheaper than investing in other asset classes directly because the fund managers buy and sell in large quantities; they achieve economies of scale in the total cost.

5. Tax saving: Investing in the ELSS category of mutual fund gives the individual the tax exemption benefit under 80(C) of up to Rs. 1,50,000. Hence, an individual can also reduce the taxable income by investing in ELSS funds.

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