Mutual Fund is an easier and more professional way of tapping the stock markets. It is particularly suited to people with investable fund but not adequate expertise or time to create and manage their own equity portfolio. A mutual fund house is an institute which collects money from several investors and then invests such money in equities, bonds or other financial instruments. A mutual fund is under the supervision of Fund Manager who takes the investment decisions. Mutual funds can be segregated into various categories based on different criterions. E. g. A mutual fund can be either Open ended or close ended, An open ended mutual fund is that fund which allows its participants to withdraw their funds as and when they want, whereas a close ended fund has a lock-in period and allow its investor to withdraw their funds only after the expiry of such period.
Other than this, mutual funds can be differentiated on the basis of their investment style, E. g. Diversified equity funds invest in equities across all the sectors whereas Sectoral funds invest only in equities related to that particular sector viz. Power sector funds invest only in companies dealing in power sector, whereas Infrastructure fund invest in Infrastructure companies. Apart from this, there are funds which only invest in bonds and/or Govt. securities and thus generate more steady income stream.
Main advantage of a Mutual Fund is that it provides professional expertise to masses in lieu of small fee. A fund is managed by a professionally qualified Fund Manager, who is in a better position to understand markets than a common individual investor. Thus, Mutual fund is a more secure way of availing the benefits of Equity market without incurring the risks of direct investment.
Find out how to make money investing using the Internet. Discover how many people currently make money investing .