Mutual Funds are very popular in the western world but in India lot of people wonder what is Mutual Fund ?? Are Mutual Funds sort of investments?? Are Mutual Funds risky??
Well, let us answer the above questions in a simple way. When a lot of investors pool money and invest in stocks, bond money market instruments and other types of securities, this is called Mutual Fund. An MF is always better than investing directly. This is a simple and easy answer to what is a mutual fund?
Investment Planning in Mutual Funds
Following are the advantages of investing in Mutual Fund:
Mutual Funds are highly regulated, SEBI (Securities and Exchange Board of India) lays down rules regulations, charges(expenses ratio), loads, etc. of Mutual Funds in India. The market regulator regularly monitors the AMC's(Funds and schemes as well). This is to ensure compliance and interest of retail investors.
Mutual Funds operates with a high degree of professionalism. A good Mutual Fund will ensure it has a well-qualified research team that takes well informed and prompt decisions.
Mutual Fund investor will have reduced risk in the portfolio. This is due to diversification as most Mutual Funds will invest in 30-200 securities. A good Mutual Fund will also increase and decrease the number of securities in the portfolio based on need and market conditions
Mutual Funds are easier to buy and sell. Investors can choose an appropriate fund based on his need for capital appreciation, liquidity, financial objective and risk appetite. A well qualifies mutual fund distributor shall help you do that.