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Mutual Funds

A open-end fund is an investment vehicle where many investors pool their money to earn returns on their capital over a period. This corpus of funds is managed by an investment professional referred to as a fund manager or portfolio manager. it's his/her job to take a position the corpus in several securities like bonds, stocks, gold and other assets and seek to supply potential returns. The gains (or losses) on the investment are shared collectively by the investors in proportion to their contribution to the fund.

Why invest in mutual funds
There are many benefits of investing in mutual funds. Here are some important ones -

Professional expertise
Consider a situation where you buy a replacement car. But the catch here is that you simply don’t skills to drive. Now, you've got two options:

i) you'll find out how to drive
ii) you'll hire a full-time driver

In the first scenario, you'd need to take driving lessons, pass the driving test and acquire a license. But if you don’t have the time for driving classes, it's better to choose a driver. Same is that the case with investments.
Investing in financial markets requires a particular amount of skill. you would like to research the market and analyse the simplest options available. you would like knowledge on matters like macro economy, sectors, company financials, from an asset class perspective. this needs a big amount of your time and commitment from you.

But if you don’t have the skill or the time to delve deep into the market, investing in mutual funds are often a superb alternative. Here, knowledgeable fund manager takes care of your investments and strives hard to supply reasonable returns. And even as you'd pay the driving force for his chauffeuring services, you've got to pay specific fees for the professional management of your open-end fund investments.
Returns
One of the most important open-end fund benefits is that you simply have the chance to earn potentially higher returns than traditional investment options offering assured returns. this is often because the returns on mutual funds are linked to the market’s performance. So, if the market is on a Bull Run and it does exceedingly well, the impact would be reflected within the value of your fund. However, a poor performance within the market could negatively impact your investments. Unlike traditional investments ,mutual funds don't assure capital protection. So do your research and invest in funds which will assist you meet your financial goals at the proper time in life.
Diversification
You may have heard the saying: Don’t put all of your eggs in one basket. this is often a famous mantra to recollect once you invest your money. once you invest only during a single asset, you'll risk a loss if the market crashes. However, you'll avoid this problem by investing in several asset classes and diversifying your portfolio.
If you were investing in stocks and had to diversify, you'd need to select a minimum of ten stocks carefully from different sectors. this will be a lengthy, time-consuming process. But once you invest in mutual funds, you achieve diversification instantly. as an example , if you invest during a open-end fund that tracks the BSE Sensex, you'd get access to as many as 30 stocks across sectors during a single fund. this might reduce your risk to an outsized extent.
Tax benefits
Mutual fund investors can claim a tax write-off of up to Rs. 1.5 lakh by investing in Equity Linked Savings Schemes (ELSS). This tax break is eligible under Section 80C of the tax Act. ELSS funds accompany a lock-in period of three years. Hence, if you invest in ELSS funds, you'll only withdraw your money after the lock-in period ends.
Another tax break is indexation benefit available on debt funds. just in case of traditional products, all interest earned is subject to tax. However, just in case of debt mutual funds, only the returns earned over and above the rate of inflation (embedded in cost inflation index {CII}) are subject to tax. this might also help investors earn higher post tax returns.