7 Replies to “what is mutual funds?”

  1. A mutual fund is where many investors put in their money and a fund manager invests it. Thus getting economies of scale, industry expertise, diversification etc. Examples are hedge fund, Unit Trust, OEIC, Investment trust, ETFs etc.

  2. Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies.

    Mutual funds have following benefits compared to direct investing in individual securities.These include:

    1. Increased diversification
    2. Daily liquidity
    3. Professional investment management
    4. Ability to participate in investments that may be available only to larger investors.
    5. Service and convenience
    6. Government oversight
    7. Ease of comparison

  3. Hi Gaurav,

    Good day. Hope you are doing fine.

    Mutual fund is nothing but a fund collected from interested investor together to make a good kitty of money to invest in certain market instrument. Now the question is, if it is market investment then where it is different than your direct equity investment ?

    Answer – 1) Your money will be diversified in different sector and different companies.

    2) Experienced fund managers with years of experience manage your portfolio.

    3) Risk is lower with certain mechanism of investment approach.

    My personal take will be –

    1) Invest on diversified equity funds. Do not heavy on any thematic / specific sectoral funds.

    2) If your risk appetite is lower, go for a good balanced fund at start.

    3) Invest heavy on Large cap / Large & mid cap funds more.

    4) Invest systematically through SIP. Invest in small amounts every months. Your risk factor will be normalized with time.

    5) Do not go all out with equity. Put some of your money in Debt and little bit in gold as well.

    6) As you grow old, get back your money from MF / equity and slowly invest them in fixed debt product.

    All the best.


  4. If you don’t want to spend a lot of time with your investments, Mutual funds can be the best solution. A Mutual fund will provide you with a good diversification and your money will be professionally managed.
    Unfortunately, like any investments, you must do your homework before investing. Basing your investment only on past performance will be foolish. This mutual fund guide will help you to choose the right mutual fund.

    How a mutual fund works?

    »Open ended funds.
    The majority of mutual funds are open funds. Open funds continuously issue shares.

    »Closed end funds.
    A closed end fund has a limited amount of shares. An investor can invest in a closed end fund by buying shares on a secondary market.

    Where to find mutual funds?

    You can find mutual funds on MorningStar’s website. (www.morningstar.com)

    Where to buy a mutual fund?

    With a broker, online broker, your bank, directly submitting to the fund.

    Types of mutual funds:

    » Money Market funds
    Money market funds invest in short term paper like treasury bills (short term bonds, less than one year maturity). They are very safe but provide a modest performance. The performance for money market funds is correlated with short-term interests.

    » Bond funds
    Bond/fixed income funds invest in fixed income securities like bonds, Mortgage backed securities and asset backed securities.

    » Equity funds
    Equity funds invest principally in stocks. The performance is generated by capital appreciation and dividends. Equity funds can be divided in the following categories: Value fund, growth fund, sector fund, fund of funds.

    » Balanced funds
    Stocks and bonds compose balanced funds. A balanced fund can provide you a good diversification by buying only one fund.

    » International funds
    They have the advantage of investing worldwide. The principal drawback is that the fund manager must deal with various exchange rates.

    » Indexed funds
    If you believe that the fund managers are not able to beat the market. You can still invest in an index fund. The management fees are usually lower because the fund only follows an index.

  5. Little people pooling their money to buy a portfolio of diversified Equities,..or any Sector you might choose..
    A strategy for someone with around $ 2000- 10,000…To get Diversification,..and marginalizing risk.

    A foot in the door for the small guy(me) to have the opportunity to get stellar returns of equities..
    Like S+P’s (U.S. index) recent return of 29%…

    They are secure as the sector they represent,..and the market conditions, and trends…If you don’t have some idea of what moves the market trends,. you would be in trouble..Research “Balanced funds”

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