Parag Parikh’s views on behavioral finance and value investing have been followed by those keen to learn about investing and financial security. Parikh is a fellow at the Owner President Management (OPM) Program of the Harvard Business School; he received his Masters in Commerce from the Bombay University. He is also the author of two bestselling books: “Stocks to Riches — Insights on Investor Behavior” and “Value Investing and Behavioral Finance: Insights into Indian Stock Market Realities,” both of which expound on his concept of Behavioral Finance which delves into human behavior and its effects on stock investing and other fiscal matters.
Mutual funds for long-term investment are one of the investment platforms that Parag Parikh has championed. But why?
Just like other forms of investments (stocks, currencies, commodities, etc.), mutual funds do come along with certain risks. But at the same time, they offer countless benefits which make them the perfect investment vehicle for those who are still new to investing and even for those who are looking to diversify their portfolio.
But what exactly are mutual funds?
Unlike other forms of investments where an individual investor gathers his resources and makes his own decisions pertaining to investing, mutual funds involve pooling the resources of a group of people for the purpose of investing in a wide variety of industries and sectors. This diversification allows investors to minimize the risks associated with investing in the stock market. Mutual investors, also called unitholders, share both the profits and losses of their venture. Mutual funds for long-term investors entail the knowledge and expertise of a fund manager to make investment decisions for unitholders.
Mutual funds can be classified into open-ended schemes and close-ended schemes. The former does not have a fixed maturity period and investors can renew their subscription on a continuous basis. In contrast, a close-ended scheme typically has a maturity period between five to seven years. Investors can subscribe to the scheme for a limited period of time.
Mutual funds can also be classified according to investment objectives and can be either open-ended or close-ended. Among these schemes are growth/equity oriented schemes, income/debt oriented schemes, balanced funds schemes, money market or liquid fund schemes, gilt fund schemes, index fund schemes and exchange traded index fund schemes.These schemes vary in terms of the assets where the capital is invested.
When choosing a mutual fund to invest in, consider your risk appetite as well as your overall investment goal. Also, looking at the past performance of a scheme can clue you in on what the performance of that scheme will be in the future.
About the author: Sarah Miller is a business consultant and a writer who loves to share her knowledge about several businesses through writing. She actually writes in behalf ofhttp://amc.ppfas.com/.