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Friday, 11 November 2011

Investment in Mutual funds

          I posted so far about  Direct Investment in share market. Another type of Investment is Indirect Investment. Indirect investment means investing in Mutual funds and portfolio management services.Let me explain about mutual fund. 
          Mutual fund is a collective investment scheme which is professionally managed. Number of professionals dedicated their time to observe good stocks. These professionals buy stocks,bonds,short term money market instruments with the money which is invested by many investors.

There are many reasons to buy mutual funds

1.Diversification: You can buy a mutual fund and obtain instant access to a hundreds of individual stocks or bonds
2. Professionally managed: Professionals like mutual fund managers and analysts dedicating their lives for researching and analyzing current and potential holdings for their mutual funds.3.Mutual funds have low minimums: Many mutual fund companies allow investors to get started in a mutual fund with as little as $1,000.
4. Systematic investing and withdrawals: It is simple to invest regularly in a mutual fund. Many Mutual Fund companies allow investors to invest as little as $50 per month directly into a mutual funds. Money can be regularly with drawn from a mutual fund and be deposited into a bank account. There are generally no fees for this service.
5 Automatic reinvestment: An investors can easily and automatically have capital gains and dividends reinvested into their mutual fund with out a sales load or extra fees.
6. Transparency: Mutual fund holdings are publicly available,which ensures that investors are getting what they pay for.
7. Mutual funds are liquid: If you want to sell your mutual fund, the sum derived from the sale are available the day after you sell the mutual fund.
8. Mutual funds have audited track records: A mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual funds.
9. Safety of investing in mutual funds: If a mutual fund company goes out of business, mutual fund share holders receive an amount of cash that equals their ownership in the mutual fund. Alternatively the mutual funds Board of Directors might elect a new investment adviser to manage the mutual funds.

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