Whenever we think about investment, the first thought that comes to mind is jewellery or a bank FD. These are considered traditional and safe investment options. There is a lower risk of losing money in these, but the returns are also quite limited. Apart from these, there are many other investment options where one can get good returns in a shorter time, such as investing in the stock market, bonds, or debt funds.
Risk in Other Investments
These are risky investments, and due to a lack of correct information, investors often suffer huge losses. If you want to invest in newer options like the stock market instead of traditional options like gold, real estate, and bank FDs but don’t have the right information, Mutual Funds can be the best investment option for you.
What Are Mutual Funds?
Mutual Funds are a type of investment where your money is managed by an experienced expert. It is a collective investment vehicle where multiple investors pool their money for a common goal, and this investment is managed by a professional fund manager. This reduces the risk of your investment.
How Do Mutual Funds Work?
Mutual Funds work as pooled investments. Many people invest their money in different types of assets, and the returns from these investments are distributed among the investors in proportion to their investment amount. Think of it like a bus journey: you can get on or off at any stop, but you have to pay for the distance you’ve travelled.
The Fund Manager Takes Care of Your Investment
Your investment in a mutual fund is managed by a fund manager. According to Kumar, “The fund manager is like the captain of a ship. They guide the investment based on market conditions and the fund’s objectives.”
How Much Risk Is There in Mutual Funds?
With Mutual Funds, your money is invested in many places like the stock market, loans, bonds, etc. Each of these options comes with its own risk. Once Ratan Tata explained this in an old interview by saying, “The risk you take in mutual funds is directly linked to the potential return. It’s like choosing between a bike and a sports car: bikes are safer but slower, while sports cars offer more speed but come with higher risks.”