Mutual Funds collect money from a large group of investors, pool it together and invest it in a wide variety of securities, in line with their objectives. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. The profits or losses are shared by the investors in proportion to their investments.

Types of Funds Sold

Mutual Fund Companies offer various schemes. The following are the different types of funds:
Debt: Liquid schemes, Income schemes, G-sec schemes, Monthly Income Schemes etc.
Equity: Diversified Equity Schemes, Sector Schemes, Index Schemes etc.
Hybrid Funds: Balanced Schemes, Special Schemes - Pension Schemes, Child education Schemes etc.

Advantages of Investing into a Mutual Fund

The reason that mutual funds are so popular is that they offer the ability to easily invest in increasingly more complicated financial markets. The advantages they offer are as follow:-.

Flexibility - Mutual Fund investments also offers you a lot of flexibility with features such as systematic investment plans, systematic withdrawal plans & dividend reinvestment.

Affordability - They are available in units so this makes it very affordable. Because of the large corpus, even a small investor can benefit from its investment strategy.

Liquidity - In open-ended schemes, you have the option of withdrawing or redeeming your money at any point of time at the current NAV

Diversification - Risk is lowered with Mutual Funds as they invest across different industries & stocks.

Professional Management - Expert Fund Managers of the Mutual Fund analyse all options based on experience & research

Potential of return -The fund managers who take care of your Mutual Fund have access to information and statistics from leading economists and analysts around the world. Because of this, they are in a better position than individual investors to identify opportunities for your investments to flourish.

Low Costs - The benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Regulated for investor protection - The Mutual Funds sector is regulated to safeguard the investor's interests.