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| Home > Knowledge Center |
| Knowledge Center |
| What is Mutual Fund |
| Mutual Funds are financial instruments. These funds are collective investments which gather money from different investors to invest in stocks, short-term money market financial instruments, bonds and other securities and distribute the proceeds as dividends. The Mutual Funds in India are handled by Fund Managers, also referred as the portfolio managers. The Securities Exchange Board of India regulates the Mutual Funds in India. The unit value of the Mutual Funds in India is known as net asset value per share (NAV). The NAV is calculated on the total amount of the Mutual Funds in India, by dividing it with the number of units issued and outstanding units on daily basis. Benefits of Investing in Mutual Funds Any one who is aware of stock market is not new to mutual funds. Mutual funds have gained in popularity with the investing public especially in the last two decades.Following are some of the primary benefits. 1. Professional Financial Experts Every Mutual Fund scheme has a well-defined objective and behind every scheme, there is a dedicated team of financial experts working in tandem with specialized investment research team. These experts diligently and judiciously study companies, their products and performance, and after thorough analysis, they decide on the best investment option most aptly suited to achieve the schemes objective as well as investors financial goals. 2. Diversifying Risk It plays a very big part in the success of any portfolio. Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. 3. Low Cost Mutual Funds generally provide an opportunity to invest with fewer funds as compared to other avenues in the capital market. You can invest in a mutual fund with as little as Rs. 5,000 and also have the option of investing a little of Rs.500 every month in a SIP or Systematic Investment Plan. 4. Liquidity You can encash your money from a mutual fund on immediate basis when compared with other forms of savings like the public provident fund or National Savings Scheme. You can withdraw or redeem money at the Net Asset Value related prices in the open-end schemes. In closed-end schemes, lock in period is mentioned, investor cannot redeem his investment until that period. |
| What is Insurance |
| Insurance is one of the most important financial topics in today’s complex world. Failure to have sufficient insurance coverage is the quickest and easiest way to accrue mass debt. Nothing will make your business, car, house, family, or self more vulnerable or susceptible to financial strain than a lack of adequate insurance. However, paying too much for insurance can be a financial strain in itself. And paying for insurance that is not needed is just money down the drain. Many people have a preconceived notion that insurance is just a waste of money, something that is not necessary. This is not true. Almost everyone needs insurance. How do you know? If you own anything that cannot be easily replaced without economic hardship, it should be insured. If your house burned down, what would you do? If you became disabled at work, would there still be food on the table? Or, in the worst case, would your family be provided for if you passed away? These are tough scenarios to imagine, but they happen every day. It is important to understand the consequences and to be prepared for the worst. Some people tend to think of insurance as a luxury, but this is not true at all. Insurance is simply a way to avoid an impoverished state. Like many things in life, the decision to purchase insurance or not is based on a system of risk/reward. Unfortunately, consumers often look at the reward and ignore the risk altogether. This can impede the process of making an educated decision. For example, the lottery is a very popular system of risk / reward. In this case, the risk is generally small, but the reward can be great, making it a popular choice. Gambling in casinos is another example. In this case, some people become so fixated on the reward that they forget the risk of losing. Think of insurance as an inverted version of the lottery. The reward (not paying for insurance and therefore saving an immediate expenditure) is miniscule compared to the possible risk (losing everything you own and being in debt for the rest of your life). And sadly, the chances of your number coming up in the insurance game are a lot greater than your chances of winning millions. |
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