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The deregulated economy has enabled investors to choose alternative assets over more traditional forms of investment. There is no dearth of such alternative investment options for both residents and non-resident Indians in India. One can choose according to their investment strength and select the best options that meet their market requirement. One needs to be careful while choosing such schemes – some of which are short term schemes while others require long term deposits. Before making such investments, one should evaluate the Indian market and then match it with their requirement and capability level. There is no point in involving unnecessary investment risk and opting for a safe return scheme like mutual funds.
It is a popular investment tool that provides a cost-effective way of investing in the financial market. In India, the concept became popular during the 1980s when non-UTI players entered the investment market. Today, it is considered to be a safe and often sound mode of investment which provides liquidity, affordability, tax deduction benefits along with the most important aspect of maximizing returns. In short, it is a safe method that helps you access money without losing it in the fluctuating trends of the market.
Another aspect that has made it increasingly popular among investors is that it allows them to invest in debt markets and equities through a systematic investment plan.
To avail the benefits, an interested party must be registered with the Securities and Exchange Board of India or SEBI. It is the company that controls the securities markets, collects money from investors, and invests in short-term instruments or stocks and bonds. It invests in a combination of investments to reduce risk and manages the securities for the investor. In simple words, the person invests in a mutual fund and through the money SEBI buys shares in the fund for him; Hence, the investor now owns a portfolio in the company, SEBI has bought shares. These assets are managed by the fund manager, who is responsible for spotting the securities and may also sell the investments for the investor in the process.
Types of such plans
There are two basic types – open ended and close ended mutual fund,
open ended mutual fund There are investment options that are administered by a mutual fund firm. It is the firm that raises money and collects it from the shareholders and once that is done the firm decides where to invest. The second scheme is where the funds are sold and bought during a time period known as New Fund Offer or NFO.
Irrespective of your choice, one must understand the fact that mutual funds reduce the investment risk involved through professional management. The expertise of the professionals involved such as fund managers help in the process of buying and selecting securities that maximize your return on investment.
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