What is a Mutual Fund Calculator? Benefits of Mutual Funds

A mutual fund is a skillfully managed investment scheme. It is run by an asset management company (AMC) that acts as a mediator for the retail investors. The AMC pools in money from a big number of depositors and invests it in equity shares, bonds, money market instruments and other sorts of securities. Each investor, in profit, is allocated a particular number of units balanced to his invested amount in the fund. The investor is known as the unitholder. The unitholder shares the gains, losses, income, and expenditures of the fund in proportion to his investment in the fund. Mutual Fund calculator gives you a quantitative direction to plan your investments.

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How does a Mutual Fund Calculator Work?

Is your mutual fund scheme generating returns in line with your expectations? Do you hesitate about what amount of SIP would help you in personal goal achievement? The Mutual Fund Calculator will give you the investment value at development by calculating fund returns depends upon your investment horizon. You can regulate the variables of the calculator such as SIP or lump sum, amount of investment, frequency of SIP, the expected rate of returns, and the duration of SIP.

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How to Invest in Mutual Funds?

There are various avenues from where you can buy mutual fund units:

  • Direct Plans: You can approach the asset management company and invest in a direct plan of your choice. These plans have a low outlay ratio because they don’t charge provider commission. Therefore, you can earn a better rate of return.
  • MF Distributor: You can contact a registered mutual fund distributor. He will help you out to complete the required documentation. You will be participating in a regular plan that will charge a provider’s commission.
  • Online: There are some third-party doorways available online. You can visit one of them and invest in a variety of mutual funds by paying a nominal fee

Benefits of Investing in a Mutual Fund:

Whether you are a beginner and want to know why mutual funds can be a good fit for your investment requirements, or if you are an advanced investor and require a reminder of why mutual funds may be best suited for your financial goals and lifestyle, here are some of the many benefits of using a mutual fund.

  • Risk diversification

The largest advantage of investing in mutual funds contrasted with stocks is risk diversification. Every stock is subject to three types of risk such as sector risk, company risk, and market risk. Company risk and sector risk are random risks, while the market risk is called systematic risk. Mutual Fund Calculator helps investors expand unsystematic risks by investing in a differentiated portfolio of stocks across different sectors.

  • Smaller capital outlay

Investors need a large capital outlay to build a diversified collection of stocks. On the other hand, since mutual funds work-based on combining money, mutual fund investors can have the require ownership of a spread range of stocks with a much smaller capital outlay. Investors can buy units of a varied equity fund with an investment as low as Rs 5,000 only.

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  • Investment expertise

Investing in a stock market needs a lot of experience and expertise. The view of understanding the risk-return trade-offs in stock market investments is the most important part of equity investing. Many trade investors have lost money in share transactions because they make poor risk-return trade-offs. Mutual funds are managed by professional fund managers who have adequate expertise and experience in picking the right stocks to get the best risk-adjusted returns.

  • Variety of products

Mutual funds provide investors a range of products to suit their risk profiles and investment objectives. In addition to equity funds, there are also balanced funds, monthly income plans, profits funds and liquid funds to outfit different investment requirements.

  • Variety of modes of investments

Mutual funds also give investors flexibility in terms of modes of investment and withdrawal. Investors can choose for different investment modes like a lump sum, systematic investment plans, systematic transfer plans, systematic withdrawal plans, switches from one scheme to another, etc. You can spend in development option of mutual funds if you want to take advantage of compounded returns over a long investment period. You can capitalize in the bonus option if you want a fixed income from your investment.

  • Disciplined investing

Share prices are highly volatile and can induce the investor to buy or sell in short periods due to fear or greed. Common trading often leads the investor to acquire losses. Mutual funds encourage investors to invest over a long time horizon that is important to creating wealth.