Investors earn from a Mutual Fund in three ways

Investors earn from a Mutual Fund in three ways:

1. Income is earned from dividends declared by mutual fund schemes from time to time.
2. If the fund sells securities that have increased in price, the fund has a capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain.
3. If fund holdings increase in price but are not sold by the fund manager, the fund’s unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain.

Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard investors’ interest, ensures that the investors are not cheated out of their hard-earned money. All in all, benefits provided by them cut across the boundaries of investor category and thus create for them, a universal appeal.

Investors of all categories could choose to invest on their own in multiple options but opt for mutual funds for the sole reason that all benefits come in a package.