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What Makes Mutual Funds an Ideal Investment?

It is an investment pool where many investors for the purpose of investing in stocks, bonds, money market instruments and similar assets. In a mutual fund, the investor gets a proportional share of the fund's gains, losses, income, and expenses. It is similar to buying a small slice of a big pizza.

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What Makes Mutual Funds an Ideal Investment?

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  1. What Makes Mutual Funds an Ideal Investment? A mutual fund is a collection of stocks and/or bonds similar to a company that, along with a group of people, invests money in stocks. It is an investment pool where many investors for the purpose of investing in stocks, bonds, money market instruments and similar assets. In a mutual fund, the investor gets a proportional share of the fund's gains, losses, income, and expenses. It is similar to buying a small slice of a big pizza. To many people, investing in mutual funds is like buying it since the investor has the choice to invest in a product according to his/her choice and comfort. Investments are often mistaken with keeping your money in a saving account and especially mutual funds have still not got much understanding amongst youngsters. Having said that, if you can get proper information and knowledge about mutual funds, you will realize that it is one of the best ways to earn the profit. For clear picture about this product, you must understand the objectives. So, here are the objectives of mutual funds in a simple and easy way. Objectives of Mutual Funds:

  2. Equity (Growth) - In this product, the investment is done only in stocks. Debt (Income) - Here the investment is done only in fixed-income securities. Money Market (Including Gilt) - Under this fund, the investment is done in short-term market instruments including government securities. Balanced - As the name suggests, the balance is maintained and hence the fund is put partially in stocks and partly in fixed-income securities. How can you make money? Once the functioning of mutual funds is clear, a new player of this game would be looking for the direct and simple ways with the help of which he/she can make money. So, here are the three ways to make money: The earning comes from dividends on stocks and interest on bonds. A fund pays out all the earnings or income over the year to fund owners in the form of a distribution. If the fund sells securities that have earned profits, its capital increases. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the manager, the fund's shares increase in price and at this moment you can sell your mutual fund shares to enjoy more profits. Benefits of Mutual Funds:

  3. One of the most important a person looks for before investing his/her hard earned money is its advantages. A smart investor would always be interested in understanding the uniqueness of a particular product. So, here it is: Professional Management - The foremost advantage of funds is that here the funds are managed professionally. Diversification - The term diversification means that you invest in a large number of assets and hence the risk is spread out. So, the more stocks and bonds you own, the less are the chances of loss. Liquidity - A mutual fund allows you get your shares converted into cash at any time. Simplicity - Buying a mutual fund is one of the easiest investment as it can be started with a small amount on a monthly basis. Economies of Scale - Since, a mutual fund buys and sells large amounts of securities at a time, the transaction cost is lower as compared to what an individual would pay for securities transactions. The Mantra to get more returns: Many of us are not aware of the fact that mutual fund investments need patience. As per the data, those who have invested money for a longer tenure irrespective of the profits they were earning, they have got higher returns. Also, a genuine fund advisor would always suggest you to continue the investment for a longer tenure and start with little. Young investors can start early and can go for growth plans in mutual funds whereas it is ideal for the people looking for retirement these funds have

  4. retirement plans. For risk-averse investors, liquid plans and fixed maturity plans prove to be healthy when the FD rates are not so favorable. For more details you can consult with the experts at Paradigm Capital Management - a trusted leader in small cap investing. Call at (518) 431-3500 to learn more about how our capabilities align with your long-term goals. Or visit here: http://paradigmcapital.com/

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