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Key Features

Key features of a mutual fund 1. Pooling Of Resources:   By pooling their investments, individuals are able to gain access to a diverse array of assets through mutual funds. This collective approach enables participation in investment opportunities that may otherwise be unattainable for those investing independently. 2 . Professional Management:   Mutual funds are overseen by professional fund managers with the necessary expertise to manage investors' capital effectively. These managers are equipped with the resources required to diligently monitor their investments and to rebalance their portfolios per the specific objectives of the fund. 3. Risk Diversification:  Mutual funds provide investors with the opportunity to diversify their portfolios across a variety of assets, including equity, fixed income, money market instruments, and commodities. This diversification serves to mitigate the downside risks typically associated with concentrating investments in a singl...
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Key Features

Key features of a mutual fund


1. Pooling Of Resources: 

  • By pooling their investments, individuals are able to gain access to a diverse array of assets through mutual funds. This collective approach enables participation in investment opportunities that may otherwise be unattainable for those investing independently.
2. Professional Management:  
  • Mutual funds are overseen by professional fund managers with the necessary expertise to manage investors' capital effectively. These managers are equipped with the resources required to diligently monitor their investments and to rebalance their portfolios per the specific objectives of the fund.
3. Risk Diversification: 
  • Mutual funds provide investors with the opportunity to diversify their portfolios across a variety of assets, including equity, fixed income, money market instruments, and commodities. This diversification serves to mitigate the downside risks typically associated with concentrating investments in a single asset. Fund managers strategically select assets that exhibit negative correlation, thereby ensuring that a decline in one asset may be counterbalanced by an increase in another.
4. Accessibility:
  • Mutual funds allow investors to start with a low initial investment, often as little as ₹100. This accessibility makes them an affordable option for small retail investors, enabling them to diversify their portfolios by pooling funds with others. This can lead to lower risk and steady wealth growth over time, even with limited financial resources.
5. Liquidity:
  • Investors can redeem (liquidate) units of an open-ended mutual fund on any business day. The proceeds from the redemption are credited to the investor's bank account within one to three business days, depending on the specific type of mutual fund. In contrast, the redemption of units in closed-ended funds, such as Equity Linked Savings Schemes (ELSS), is only permitted at maturity.
6. Low cost:
  • Mutual funds are affordable investment options. Thanks to their high economies of scale, the costs associated with mutual funds, represented by the expense ratio, are low. The expense ratio is calculated as a percentage of the net asset value of the fund.
7. Variety:
  • There exist various categories of mutual funds that cater to investors with differing risk tolerances and financial objectives. These categories include equity funds, debt funds, hybrid funds, and money market funds, among others. Each type is designed to meet specific investment needs and goals.
8. Regulated:
  • The mutual funds industry operates under a structured regulatory framework to ensure transparency and protect investors. In India, the primary regulatory authority overseeing mutual funds is the Securities and Exchange Board of India (SEBI). SEBI plays a crucial role in establishing guidelines and regulations that govern the functioning of mutual funds, thereby fostering investor confidence and promoting fair practices within the industry.

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