What are the mutul funds

INTRODUCTION

Mutual Funds are among the hottest favorites with all types of investors. Investing in mutual funds ranks among one of the preferred ways of creating wealth over the long term. In fact, mutual funds represent the hands-off approach to entering the equity market. There are a wide variety of mutual funds that are viable investment avenues to meet a wide variety of financial goals. This section explains the various aspects of Mutual Funds.

What is Mutual Fund and Why Mutual Fund?

What are mutual funds?
A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. It is called a ‘mutual’ fund because all risks, rewards, gains or losses pertaining to, or arising from, the investments made out of this savings pool are shared by all investors in proportion to their contributions.

Why Mutual Fund?
Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds.
The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme’s stated objective.
 It gives the market returns and not assured returns.   
In the long term, market returns have the potential to perform better than other assured return products.   
Mutual Fund is the one of the most cost efficient financial products.

Advantages of Mutual Funds

• Professional Management
• Diversification
• Convenient Administration
• Return potential
• Low cost
• Liquidity
• Transparency
• Flexibility 
• Choice of schemes 
• Well regulated 
• Tax benefits

Taxation Benefit investing in Mutual Funds
The amount invested in tax-saving funds/Equity Linked Saving Schemes (ELSS) is eligible for deduction under Section 80C upto a limit of Rs.1,50,000/- (in a financial year).
Dividend from Mutual Fund Schemes is Tax-Free in the hands of the Investor/receipient.
Indexation Benefit under Long term Capital Gain in Debt schemes.