what is mutual fund? Is it good for investment...?

Question

please tell me in detail what are its advantages and disadvantages and who's mutual fund is best whether its tata, reliance, sbi or any other.....

Answer 1

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and other securities. In a mutual fund, the fund manager (who takes care of the money and where to invest it) trades the fund's underlying securities (money), realizing capital gains or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value (NAV), is calculated daily based on the total value of the fund divided by the number of shares purchased by investors.

One of the big advantages as I see it, that it is a kind of protection against ignorance. Don't get me wrong, by ignorance I mean those who don't have any knowledge about trading (most of us are included). If these people invest without any knowledge they generally tend to loose in the longer term. If your investment adviser is relatively good, you generally get on an average about 20% returns per annum. By investing in mutual funds another advantage for people without knowledge in investments is that they don't have to rack their brains thinking what to invest in, whether they invested in the wrong stocks etc. Generally if u choose a good fund (it again depends on your adviser) u will surely get 20% returns average.

One of the major disadvantage / risk that I see is that the entire money and risk is yours. They don't put in a penny. And the returns they give you are only 20% of what they actually get. So the equation kind of works out is :
You (investor) : 100%money, 100%risk, 20%returns
They(fund company): 0%risk, 80%returns.

(Ask a banker if he will ever give u loan to buy mutual funds?)

So if a person chooses a bad fund then he looses even his initial investment that he put in. If you look in this way it is risky and you don't get the kind of returns you can make if you spend only a little time in financial education.

But for a person illiterate in financial education it is a great investment. Generally atleast u make 20% without any headache.

There are many other good funds too (besides tata, reliance sbi), Franklin Templeton, HDFC, Kotak Mahindra, Sundaram, HSBC etc. It will be advisable if you spend some time doing research (through the net or buy some biz magazines) on various funds to pick the ones that best suit your investment objectives (or just go to a reputed trading company, and pay some money and hire an investment adviser). I am giving some links below where u can do your own research.

http://www.mutualfundsindia.com/

http://www.moneycontrol.com/mutualfundindia/

From the link below too u can track daily prices.
http://www.amfiindia.com/

All the best.

Answer 2

A mutual fund is a pool of money that is invested by a mutual fund company for those who have place money into the pool. Some are good investments and some are not so good investments.

The big advantage of a mutual fund is that a small investor with not a great deal of money to invest can get investment diversification where he/she could not by investing in individual stocks. In that diversification there is less specific risk that the investment will go sour.

The big disadvantage is the expenses charged by the investment company, which subtract from the overall return of the mutual fund. The smaller the expenses the better. The other possible disadvantage is that the fund may not be well managed. Many are not. However, by doing your research you can eliminate the funds that are not well managed. Their past performance is a good indication.

Here is a link to the site where you can do your research.

http://www.valueresearchonline.com/funds/default.asp

Answer 3

I congratulate on your decision to begin investing. I think the sooner you start the better it is. However, I am not a big fan of mutual funds. For once, most of the mutual funds will lag behind an index fund after factoring in for management expenses. Second, I think you could do a much better job investing for your self directly in the stock market provided you have done enough research. So I would say, index funds are the best way to go since they offer better returns than mutual funds. In the mean time, read read read to find out more about the stock market. Remember, the stock market is the ONLY market where buyers run for the exits when there is a sale (refering to the corrections, drops, etc). So being a contrarian would benefit you.

Answer 4

Mutual funds are safe for investing. The worst I have ever done (after 5 years) is walk away with the same amount I invested. They recommend a very long-term placement into a mutual fund, because of how the market varies from year to year. I guess 5 years wasn't long enough at that time. If you can put your money away for a lengthy amount of years, it's probably the safest investment you can have.

Check with a local stock broker, he/she will give you a free consultation. Good Luck!

Answer 5

Mutual funds are investments that are made on your behalf by experts with an intention to provide you better returns. Mostly they would be investing in stock market, even though other type of mutual funds are yet to come.

They are less risky when compared to direct investment in the stock market.

Answer 6

When you compare different funds, here are some things to look for:

5 & 10 year performace.
# of years the current manager has been with this fund
Expense ratio (over 2% is high)
Size of the fund (total assets managed by this fund)
Type of fund (Stock, Bond, International, small cap, sector)

Answer 7

1

Answer 8

The fastest way to explain it - It gives a diversified portfolio to the investor who doesn't know how to do it themselves. It just sucks that with a lot of them the minimum investment can be a lot.

Answer 9

MUTUAL FUNDS INVEST IN STOCK MARKET FOR U
RELIANCE IS BETTER
YEAH ITS GOOD FOR INVESTMENT