Mutual Funds pool money from various investors and invest the same in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments.
These combined holding together is known as Portfolio. Each unit represents an investor's proportionate ownership of the fund's holdings and the income those holdings generate.
Reasons why should Consider investing in Mutual Fund
1) Professional Management
Money is invested through fund managers, so one need not worry and as the decision is taken by portfolio managers.
Diversification is an investing strategy that can be neatly summed up as "Don't put all your eggs in one basket".
By owning shares in a mutual fund instead of owning individual stocks or bonds, the risk is spread out.
3) Economy of Scale
Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions
Just like individual shares, mutual fund units are convertible into money by way of sale in the market. One can buy and sell mutual fund units anytime at their convenience. Many banks have sponsored their own line of mutual funds and the minimum investment amount is small.
5) Mutual Fund to suit your need
Mutual Fund offers wide range of funds to choose from depending on the goal and risk profile. Mutual Fund can suit the need of young investors as well as a senior citizen.
Difficulty in mutual fund lies in the transparency, as the fund is managed by fund managers.
Fees charged by some institution is also high such as sales charges, fees and expenses.
However, investors should examine each of the above features carefully before investing in mutual funds. As mutual Fund investing are subject to market risk.