Determining the correct strategy of investment is a daunting mission, especially for a beginner. Often people jumble up savings and investment. Taking both as the synonym of each other is a flaw. The intention of investing is entirely opposite to that of saving. There is no point in penny-pinching if you are not able to multiply that money. Savings is just the summation of the money you accumulate over the years with a small interest accruing.
The traditional mechanisms of saving have lost their gravity. The continually reducing interest rates along with the narrow scope of accumulating money, have triggered people to switch on more lucrative schemes. To bridge the gulf between savings and investments an ingenious stratagem has been devised- Mutual Fund. Giving a new upsurge to the age-old practice of saving has created a sensation amongst the people. Therefore, mutual fund is magnetizing people to invest rather than merely save. One can say that mutual funds are the best resort for profit-seeking investors as well as security-oriented investors.
Mutual fund incorporates the notion of accumulation from the Co-operatives. Collectively, selling the produce to get an increased return as compared to individual sale is the axis of Co-operatives. Going by the same motto, Mutual Fund is the conglomeration of two words Mutual and Fund, where Mutual means sharing or pooling and Fund means a scheme. Therefore, a comprehensive interpretation of Mutual Fund indicates a plan that promotes joint investment practices to earn exorbitant profits.
The mutual fund companies employ competent fund managers to deploy the pooled money wisely that ultimately touches the zenith of gain. The fund managers judiciously invest the legal tender in variegated schemes which provide capital appreciation and security, contingent according to the call of the investors. Hence, by handing over your hard-earned money to the mutual fund companies, half your tautness is released. From that point, it becomes the obligation of the fund managers for delivering an increased return to meet the requirements of the investors.
The two primary concepts working in full swing behind the scenes to ensure profit maximization are:
- Rupee Cost Averaging is the notion of valuing the worth of a single penny invested. Replenishing the glass drop by drop will always prevent any chances of wastage at the same time, obstructs the likelihood of spilling. Likewise, annexing the investment gradually will always yield unparalleled corpus. For example, if you buy gold at varying valuations, then sometimes you will be able to purchase more quantity and at the other times less quantity for an equal sum invested every time. But, in the end, you will notice that your gains are averaged. Thus, Mutual Fund endorses the proclivity of regular investment in the investors.
- The power of compounding implies the capacity of the money to grow. Say, suppose a person who commences job at the age of 25 years will contribute more towards his retirement fund as compared to person who beings to work at the age of 35 years. It is quite evident from the example that the early you start the more benefit you will get. Therefore, giving an early start to your investment will surely provide a greater opportunity for wealth accumulation. So, plan and initiate your investment strategy as soon as possible.
Apart from the technicalities, Mutual Fund is the one-stop solution for different expectations of the investors like, accruing a higher return than the traditional saving techniques, accumulating wealth for future, shielding against sudden financial shocks, and the list goes on.