Disadvantages Of Mutual Fund Investment

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People often invest in several investment plans. Their choice of plans depends on their income and investment objectives. Individuals falling high in the income category often prefer tax-saving instruments along with high risk high-reward investment options. On the other hand, people with moderate incomes prefer plans that offer both tax-saving and decent returns in the long-run. Mutual fund investments are best for such individuals. Mutual Funds: Mutual fund investments invest money in the stock market on the behalf of the investors. This is a pool of fund that collects money from the investors and invests in the market in different asset classes. The fund house or the institution that invests on the investors’ behalf charges a fee for managing…show more content…
Investors are required to visit the concerned fund house branches with all the relevant documents. A big advantage of this type of investment is that they can save commissions charged by the fund managers. Most fund houses charge a commission at nominal rates but it adds up to huge amounts of money in a longer tenure. In addition, this investment option is good for the investors who have a fair understanding of the market and have the time and resources to dedicate in the research, and tracking and managing their…show more content…
Liquid funds: Under this scheme, money is invested in short-term or very short-term instruments i.e. T-Bills, CPs, etc. with a purpose of providing liquidity. These schemes have low risk and offer moderate returns. These are ideal for investors with short-term investment timelines. ELSS: Equity Linked Savings Scheme that invest in equity shares. Investments made in these funds are also eligible for deductions under the Income Tax Act. They are considered high on risk but also offer high returns as per the performance of the fund. Fixed Maturity Funds: Fixed maturity funds invest in debt and money market instruments. Pension Funds: These funds invest with a long term goal in mind. The investment in this fund are split between equities and debt markets. Here, equities act as the risky part of the investment and provide higher returns while the debt markets balance the risk and provide lower but steady returns. • Specialty: Sector Funds: The investments in these funds are made in specific market sectors such as infrastructure, petroleum, etc. And therefore the returns are connected to the performance of the chosen

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