Mutual Funds: Important Facts Revealed

A mutual fund is the trust that pools the savings of a number of investors who share a common financial goal.
The money that are collected from investors then invested by the fund manager in different types of securities. These could range from shares to debentures upon the scheme’s stated objective.
Mutual fund is one of the most cost efficient financial products.
By investing in mutual fund, one can gain the service of professional fund managers, who would otherwise be costly for an individual investor.
Without investing a large amount of money one can enjoy the service of trading through mutual fund.
Since many investors are investing in one scheme so the market risk (if any) get divided among the investors. Hence ultimately the risk is comparatively lower than other investment plans.
The trading of units in mutual fund done through the stock market. And the price of commodity is not stable all the time. So the market value of the commodity is fluctuated and thus the risk mostly called the market risk also fluctuated with respect to the price of the traded commodity.

mutual funds are mainly of three types. These are listed below with the help of a diagram.

Capital Appreciation: as the value of securities in the fund increase, the fund’s unit price will also increase. There would be a capital appreciation when you sell your available units at a price higher than the price at which you bought.
Coupon / dividend income : fund will earn interest/coupon from the bonds it holds on.

Under sec 80c up to a limit of 100000 in a financial year is eligible for deduction in a savings scheme.
Dividend from mutual fund scheme is tax free in the hands of investor.
Indexation benefit under long term capital gain in debt scheme.