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Why to put money in mutual funds?

Why to put money in mutual funds?

India, being one of the world’s fastest growing economies is seeing a huge surge of middle income population. After decades of a sick, indebted socialist structure, India opened up to the world in the early years of 1990s. Ever since then, people like us have seen our incomes go up as well as our cost of living. This huge pool of middle class, however, is still not very savvy to the new modes of money making mantras, popular in the developed West and being adopted elsewhere.

 

For centuries, people in India have made a single commodity, their primary mode of investment and wealth security.  It is a commodity which was craved for by Maharajas, Sultans, Badshahs and the British. Yes, that ‘modelled’ area of investment was gold.

A new popular investment channel

But today, the world has changed, India is changing. So should we not look out for other areas of investment? And when we talk about other, I mean to say a new popular investment channel called ‘mutual funds’.

What is Mutual funds?

Mutual funds are nothing but a pool of money, garnered from investors, who wish to safeguard their financial resources and in many cases tries to get make gains out of the little they have. The fund managers take money from a sizeable bunch of investors, usually taking small amounts, and put it on the market at various destinations. The destinations could be stocks, debt, securities, venture capital (VC), etc. Many in India have started to opt for investing in mutual funds. A good chunk of the list belongs to the thriving middle class.

We know that there are various investment channels in the market like stocks, securities and commonly ‘loved’ gold. But mutual fund is a much better and secured way to gain profits out of your hard earned savings.

Here’s why:

Mohit Kothari (name changed) had got an offer to invest in a mutual fund scheme; his friend was working in, 5 years ago. He was asked to invest a part of his salary in the scheme on a monthly basis. He paid rupees 2,000 per month. To make sure he doesn’t run out of money because of spending, he always credited 2,000 rupees to the mutual fund on the day he receive his payroll. In this manner he forewent any instance of skipping his due, hereby conforming a monthly saving. In 60 months, i.e. 5 years, he got a return of 35,000 rupees on the combined investment of 1,20,000 rupees.

The fund manager, whom he entrusted with his savings, distributed and circled it around markets and got him a profit of 584 rupees (29.2%) per investment of 2000 rupees. Today he is willing to invest a greater amount of money in the mutual fund, to guarantee him of a saving and potential profit.

Mutual funds are hence looked upon as an increasingly popular and sometimes favourite option for people to invest, or for many rather save. The less-risk mode of money making is soon gonna attract people to look out for such fund managers, averting them from traditional ways of bank deposits, FDs, gold buying, or simply cash hoarding.

Conclusion:

To conclude in both a positive and cautionary note, mutual funds are subject to market risks. Your money is going to many unknown destination. It is highly advised by money making ‘gurus’ to make sure your fund manager’s and their firm’s entire history of operations is at your immediate disposal. Being a new hotspot for investment money, there may be phoneys trying to cheat by proposing eye catching guaranteed returns.

Making sure their potential and capacity to do it is well within the market’s limits is a very considering factor. But also, mutual funds requires a rather modest amount of your savings, just as per as your capacity. Hence it doesn’t tighten the strings of your pockets. As money garnered from such investors are chipped and put in various sectors, it will indirectly guarantee a return, if not colossal profit.

Hence, look out for all options possible in the market. Investment opportunities are being dug to the bottom, for striking gold. It wouldn’t be fair to remain behind in this board game, would it?

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