InvestorQ : How exactly do mutual funds work?
Grinol Bansode made post

How exactly do mutual funds work?

3 years ago

Mutual funds get their investment pool from investors who have subscribed to the mutual fund schemes. This means that many investors pool their individual investments and give them to a professional fund manager who in turn invests this money in line with the common objective of the fund.

While selecting a mutual fund, one must pay a lot of importance to the fund manager and should analyze his/ her track record. After all, this is the person whom you are giving the responsibility of handling your hard-earned money.

A fund manager is a qualified investment professional who has rich investing experience. The fund manager is usually one who has observed various bull and bear cycles and has developed investment strategies after detailed market analysis. Thus, he manages the day-to-day trades in the scheme’s portfolio.

By investing your money in a mutual fund, you gain the fund manager’s focused and dedicated services other than a well-equipped research team that analyses the domestic and overseas market, spots trends, and potential winners among various stocks.

You can choose to sell (or redeem) your mutual fund units when the market is doing well so that you can gain from your investment. The gains will be determined by the number of units you hold and the current price of the units on the day you want to redeem.

However, you must bear in mind the tax implication of redeeming your mutual fund units. The tax liability varies according to the tenure for which the mutual fund is held.

I do follow the fund screener on mf.indiainfoline website of indiainfoline before investing.