| Basics | | | | investing. If one company in that sector has a bad |
| Mutual Funds (MFs) are primarily engaged in | | | | manager, or a losing strategy, it is balanced by |
| investing in stocks. Then why should not one | | | | other companies that are performing better. This |
| invest in stocks directly and what is the need for | | | | lowers the risk, thanks to diversifications. |
| these funds? This question is answered below: | | | | Scope & schemes |
| As investors, our priority always will be to focus | | | | Mutual funds operate variety of schemes—say |
| higher profits in the shortest time. With this goal in | | | | Equity market, Bond Market, Debt market and so |
| mind, we look upon the avenues open for | | | | on. Once an investor invests in MF, he has the |
| investment. | | | | option of ‘’ SWITCH’’ which |
| Time management | | | | means that he can change his risk perception |
| To directly invest in shares, one should require | | | | periodically depending on the Economic Scenario |
| expertise to analyse and compare financial | | | | which is not possible if one invests directly in |
| statements of the companies where we | | | | Share Market. Secondly, most of them have the |
| invest. By investing in mutual funds, one is | | | | scheme of “SIP” that is Systematic |
| essentially hiring a professional manager at an | | | | Investment Plan whereby one can invest a fixed |
| especially inexpensive price. It would be stupid to | | | | amount over a period of time and reap the |
| think that one knows more than these managers | | | | benefits of price changes of shares over the |
| who have been around the industry for a long | | | | period. |
| time and who have proper academic credentials. | | | | Liquidity |
| This not only saves our precious time but also | | | | Investment in MF is as liquid as investment in |
| provides the expertise. | | | | stocks or better than that as some scrips can be |
| Risk focus | | | | sold only in market lots. That is no so in the case |
| With shares, one worry is that the company | | | | of investment in MF. Stocks can be much more |
| invested may go bankrupt. With mutual funds, | | | | difficult depending on what kinds you have |
| that chance is next to nil. Since they typically hold | | | | invested in. CD's offer no liquidity (not without a |
| anywhere from 25-5000 companies, all of the | | | | hefty fee) and bonds can be difficult, too. Some |
| companies that it holds would have to go | | | | mutual funds also carry check writing privileges. |
| bankrupt. | | | | To know about investing in mutual funds visit |
| By pooling a lot of shares (in a stock fund) or | | | | Investing in Mutual Funds and to get an idea as to |
| bonds (in a bond fund), MFs reduce the risk of | | | | how mutual funds work visit Mutual Funds. |