WHY INVEST IN EQUITY?
TO EARN NET OF TAXES RETURN WHICH IS HIGHER THAN THE EFFECTIVE INFLATION RATE.
LIMITATIONS OF INVESTING IN STOCKS DIRECTLY: - SELECTING AND MONITORING STOCKS IS A TIME CONSUMING TASK - TO ABLE TO SELECT STOCKS ONE REQUIRES TO HAVE CERTAIN SKILLS, EXPERIENCE AND RESOURCES.
WHAT IS THE ALTERNATIVE THEN ?
THOSE OF US WHO AREN’T ABLE TO UNDERSTAND THE NITTY-GRITTY OF THE EQUITY OR DEBT MARKETS, OR
CANNOT DEVOTE ENOUGH TIME TO SELECT AND MONITOR STOCKS OR
LACK REQUIRED RESEARCH INPUTS AND RESOURCES TO DO THAT…...CHOOSE TO INVEST THROUGH MUTUAL FUND WHICH IS AN INDIRECT WAY…
WHAT IS A MUTUAL FUND ?
MUTUAL FUND IS A VEHICLE WHICH
-
COLLECTS MONEY FROM INVESTORS
-
INVESTS IN DIFFERENT MARKETS AND SECURITIES
-
IN LINE WITH THE INVESTMENT OBJECTIVES AGREED UPON
MF transaction Partner : BSE STAR MF 
ADVANTAGES OF MUTUAL FUND
PROFESSIONAL MANAGEMENT THIS INCLUDES
INVESTING IN LINE WITH THE INVESTMENT OBJECTIVE;.
INVESTING BASED ON ADEQUATE RESEARCH
ENSURING THAT PRUDENT INVESTMENT PROCESSES
PORTFOLIO DIVERSIFICATION
INVESTING IN MF PROVIDES INVESTORS THE EXPOSURE TO ARRANGE OF SECURITIES HELD IN THEIR INVESTMENT PORTFOLIO...
THUS, EVEN A INVESTMENT OF RS.1000 IN A MUTUAL FUND SCHEME CAN GIVE INVESTORS PROPORTIONATE HOLDING IN MANY DIVERSIFIED SECTORS AND COMPANIES.
ECONOMIES OF SCALE
POOLING OF LARGE SUM OF MONEY FROM MANY INVESTORS MAKES IT POSSIBLE FOR THE MUTUAL FUND TO ENGAGE PROFESSIONAL MANAGERS FORM AN AGING INVESTMENTS.
LIQUIDITY
INVESTORS IN A MUTUAL FUND SCHEME CAN TAKE OUT MONEY AS MUCH AS HE REQUIRES.
DEPENDING ON THE STRUCTURE OF THE MUTUAL FUND SCHEME, THIS WOULD BE POSSIBLE, EITHER AT ANY TIME, OR ONLY ON CLOSURE OF THE SCHEME. SYSTEMATIC APPROACH:
MUTUAL FUNDS OFFER FACILITIES THAT HELP INVESTORS INVEST AMOUNTS REGULARLY THROUGH A SYSTEMATIC INVESTMENT PLAN (SIP)
OR WITHDRAW AMOUNTS REGULARLY THROUGH A SYSTEMATIC WITHDRAWAL PLAN (SWP)
OR MOVE MONEY BETWEEN DIFFERENT KINDS OF SCHEMES THROUGH A SYSTEMATIC TRANSFER PLAN (STP)
REGULATORY COMFORT & TRANSPARENCY
THE REGULATOR, SECURITIES AND EXCHANGE BOARD OF INDIA(SEBI), HAS MANDATED STRICT CHECKS AND BALANCES IN THE STRUCTURE OF MUTUAL FUNDS AND THEIR ACTIVITIES. MUTUAL FUND INVESTORS BENEFIT FROM SUCH PROTECTION.
WHAT IS SYSTEMATIC INVESTMENT PLAN (SIP)?
IT’S A MODE OF INVESTMENT WHERE A PRE-DEFINED FIXED SUM OF MONEY GETS INVESTED AT A REGULAR FREQUENCY (MONTHLY, QUARTERLY, WEEKLY ETC.) THROUGH AUTOMATED INSTRUCTION GIVEN TO BANK.…
ADVANTAGES OF SIP
MAKES MARKET TIMING IRRELEVANT
WHEN WE INVEST THROUGH SIP, THEN WE FOLLOW A DISCIPLINED APPROACH–I.E. WHETHER IT IS RAINY OR SUNNY–WE INVEST A FIXED SUM OF MONEY EVERY TIME. THIS APPROACH HELPS IN GATHERING LOT OF WEALTH OVER LONG TERM.
POWER OF COMPOUNDING
REGULAR INVESTMENTS THROUGH THE SIP ROUTE WILL HELP OUR WEALTH TO GROW BY LEAPS AND BOUNDS.
RUPEE COST AVERAGING
THROUGH SIP WE WOULD TYPICALLY BUY MORE OF A MUTUAL FUND UNIT WHEN PRICES ARE LOW AND SIMILARLY BUY FEWER MUTUAL UNITS WHEN PRICES ARE HIGH.IT ENABLES US TO LOWER THE AVERAGE COST OF OUR INVESTMENTS.
BRINGS IN DISCIPLINE & HELPS IN ACHIEVING FINANCIAL GOAL
INVESTING ON A PRE-SET DATE EVERY MONTH, MAKES YOU SET ASIDE FIXED SUM OF MONEY TO INVEST AND GRADUALLY TURNS YOU INTO A DISCIPLINED INVESTOR.