Know Why Mutual Funds are best to Invest?

Mutual Fund is a pool of fund generally of several small investors. The collected fund is then invested in financial instruments such as Stocks, Bond/Debentures, Govt. Securities, and Fixed Deposits (as prescribed by Mutual Fund Regulation, 2067). Such investment decisions are made by a Fund Manager. Returns from the investment are shared proportionately among the investors on the basis of the units held by them. Mutual Fund in Nepal is regulated by Securities Board of Nepal (SEBON). Mutual Fund in Nepal are issued, supervised and managed only by entities/individuals fulfilling the criteria led in Mutual Fund Regulation, 2067 and as authorized by SEBON. There are a total of seven mutual fund scheme listed in market at present. They are Siddhartha Investment Growth Scheme-1 (SIGS1) worth Rs 50 crore, Siddhartha Equity Oriented Scheme (SEOS) worth 100 crore, Laxmi Value Fund-1 (LVF1) worth Rs 50 crore, Nabil Balanced Fund-1 (NBF1) worth 75 crore , NIBL Samriddhi Fund-1 (NIBSF1) worth Rs 100 crore, NMB Sulav Investment Fund-1 (NMBSF1) worth Rs 75 crore and Global IME Sammunati Scheme-1 worth Rs 80 crore. Two Mutual Funds are in the verge of operation. They are NMB Hybrid Fund L-1 and Nabil Equity Fund. NMB Hybrid Fund L-1 has been floating public issue of 8 crore unit shares worth Rs 80 crore from Bhadra 26, 2073.Nabil Equity Fund will be  floating public issue worth Rs 1 arba or 10 crore units on Ashwin 2, 2073 Mutual Funds offer many benefits to investors. Let us analyze some major reasons to invest in Mutual Fund Schemes.   Beat Inflation Mutual Funds help investors generate better inflation-adjusted returns without spending a lot of time and energy on it. While most people consider letting their savings 'grow' in a bank, they don't consider that inflation may be reducing its value. Suppose you have saving of Rs. 1 lakh in a bank. If any bank offers 3% interest per annum, by next year you will have Rs. 1.03 lakh in your bank account. However, inflation in Nepal is more than 10% in year 2016. By the end of year, the same saving of Rs 1 lakh with 3 percent interest becomes the sum of Rs 1.03 lakh whereas due to inflation your increased money in bank won’t be able to buy same good that you can purchased before one year due to inflation. In the context of Nepal, average return of Mutual Fund is 15 percent whereas fixed deposit offers 8 percent annual return and inflation rate is 10.4 percent by July 2016.Compared to fixed deposit rate and inflation rate, mutual funds are ahead of both rates, so it is better to invest in Mutual Fund. Mutual Funds provide an ideal investment option to place your savings for a long-term inflation adjusted growth so that the purchasing power of your hard earned money does not plunge over the years.   Professional Management Mutual Funds do not require a great deal of time or knowledge from the investor because they are managed by professional fund managers. Also they are guided by experts.Team of managers, researchers and analysts continuously research, select, trade and monitor performance of the securities the Funds invest in.   No Large Investment Compulsory For someone with just a few thousand to invest, building and managing a portfolio could potentially be highly impractical. Mutual Fund is a best option for those investors who are willing to invest in stock market but lack knowledge about it. It is also a best investment alternative for these type of investor. It is a good decision to invest in mutual fund than do saving in Bank and Financial Institutions (BFIs). Most stock options require significant capital, which may not be possible for young investors who are just starting out. Mutual Funds allow them to make an investment, even if you have a very small amount to invest. Minimum amount needed for investing in mutual fund is Rs 1,000 which comprises of 100 units at Rs 10 per unit.   Government Preference The Government policies continuously support mutual funds through various incentives such as tax breaks. The Government of Nepal has promoted mutual funds by waiving tax on capital gain and interest income generated by investments of the mutual funds. This waiver of taxes guarantees increased returns as compared to if an individual made the same kind of investment. Also Government has made mandatory provisions to allocate 5% of the total Initial Public Offering (IPO) for mutual fund.   Liquidity “Liquidity” refers to the extent to which the fund’s holdings can be quickly converted to cash. The units of the mutual funds are listed securities in Nepal Stock Exchange Limited which can be easily traded or pledged for liquidity.    Conclusion In present context of Nepal investors are becoming more aware about Mutual Fund Schemes. Large units of mutual fund are being traded on NEPSE. However, mutual funds are not risk-free as they also invest in stock market. It is better to understand about market twist before investing in mutual fund. Investor should do detail inquiries.