The age-old custom of keeping your money in a savings account in banks is gradually getting replaced by various other means of utilizing money. A lot of new investment options have come up in the recent times. These investment options have performed beyond expectations. There are various options for investment today. Among these, one of the simplest yet effective investment options today are mutual fund investments.
Let’s take a closer look at mutual funds to understand how it works and what benefits it can bring you.
Companies dealing in mutual funds collect money from the investors and look for profit-yielding options such as stocks, debt instruments, etc. of various companies. The money invested by individual investors are pooled together by the fund managers and are set up to be used mostly for infrastructural developments and various other innovative projects by various companies and agencies.
Investments made in mutual funds grow by the averaging of return-cost ratio and the power of compounding. When you hand over your money to the fund managers for investment, you give them the responsibility to manage your funds in such a way that brings you maximum profit. The returns made by your money are reinvested at a constant rate every year. The interests and dividends also keep growing consistently. This is the reason for a substantial increase in the amount you invested at the end of the investment period. This is the basic principle behind the working of mutual funds.
How investment in mutual funds can benefit you?
Investing in mutual funds can fulfil a lot of necessities of an individual. Here are some of the benefits you get from mutual fund investment:
- You can learn to manage your expenses
- You can earn extra from your savings.
- You can create extra income that can support you to meet unforeseen expenses.
- You can secure your future.
- You can contribute to the overall economic welfare of the country.
What are the costs involved in mutual fund investment?
While mutual fund investment brings in a lot of profit, there are some expenses involved in the process. The various costs involved in mutual fund investment include asset management costs, transaction costs, holding fees and other taxes. The amount that is actually invested is the amount derived after deducting all these expenses. In spite of all these expenses, mutual funds really do well in the long run. Such is the power of compounding. Investing for a long term is therefore advisable to get better returns on your investments. So, if you are looking for an investment plan that gives you the returns similar to stock investment but with lesser risk, mutual funds are the right choice for you. To calculate and compare mutual fund returns, visit www.sipinvestment calculator.com.
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