What is Mutual Fund, Know its Advantages And Disadvantages 0

What is Mutual Fund, Know its Advantages And Disadvantages — What is mutual fund, how it works and what are its benefits, know all this information in Hindi today. How it works and what are its benefits. What are units, how can you invest in mutual funds and how is it considered a safer investment than investing directly in the stock market? There is really not much to be feared if you look closely enough to understand the basics of Mutual Funds. So to explain this it is necessary to answer a basic question that what is a mutual fund?

What is Mutual Fund-

The amount deposited by a large number of investors is called Mutual Fund, which is put into one fund. The fund manager uses his investment management skills to invest this money in various financial instruments. Mutual Fund invests in many ways, which determines its risk and return.

What is Unit?

When many investors together invest in a fund, the fund is divided into equal parts called units.


Suppose some friends together want to buy a piece of land. The cost of a piece of land of 100 square yards is one lakh rupees. Now if we divide this fund into units of Rs 10, then 10,000 units will be made. Investors can buy as many units as they want according to their investment capacity. If you have only Rs 1000 to invest, you can buy 100 units. In the same proportion you also became the owner of that investment (land).

Now suppose that the value of this one lakh investment increases to Rs.1,20,000 after one month. Now, according to this investment, if the unit price is calculated, then the unit of ten rupees has now become twelve rupees. The investor who had bought 100 units for Rs 1000, now his investment (100X12) has become Rs 1200 at the rate of Rs 12 per unit.

The amount invested by you as an investor is based on the number of units you own. Hence, an investor can also be known as a unit holder. The increase in the value of the investment along with other income earned thereon after deducting applicable expenses, loads and taxes is distributed to the investors / unit holders in proportion to the number of units.

Benefits of Mutual Funds-

  • From this you can see that an investor who is not able to make big investment, has the facility to invest in small units.
  • Apart from this, the biggest advantage of Mutual Fund Mutual Fund is that an investor who does not have much knowledge of the market leaves his investment in the hands of experts.
  • Experts decide where, how and when to invest. Along with knowing the benefits, it is also appropriate to know the risk involved in investing in mutual funds.

Where to Invest With Mutual Funds-

Mutual funds invest in many ways. The most prominent are the bond and stock markets. Apart from this, you can invest in gold or any other commodity. There are many types of funds which are known according to their investments. The main ones are debt, equity and balanced funds. The maximum diversity is found in equity funds.

Why is it The Choice of Investors-

In the recent times, mutual funds have emerged very fast as an investment option and more and more people are investing in it. The main reason for this is that investing in mutual funds is easy and investing in mutual funds through SIP is becoming the choice of more and more people.

Mutual funds are a very good option to invest where interest in banks is decreasing. If invested for a long time, it can become a means of getting the highest return on investment.

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