Advantages of Investing in Mutual Funds

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Advantages of Investing in Mutual Funds
Mutual funds invest in the same kinds of stocks and bonds that individual investors can (and do) buy — so why employ a middleman (the fund manager)? What benefits do you
enjoy from investing through a mutual fund rather than purchasing directly?
Putting your money to work in mutual funds provides distinct advantages over other forms of investments. If, after you weigh the pros and cons, you decide to take the plunge,
you’re likely to come up with your own additions to the list of benefits.
Diversification
Diversification involves spreading your money around among several different kinds of investments in order to reduce the risk of concentrating in a single security .When your investments are diversified, you don’t take a major hit if any one investment performs poorly. Thus, the savvy investor avoids concentrating all her investments in the stock
of a single company, or even a single industry.
Low entry cost
You can get started in mutual fund investing with relativelylittle money — a benefit when finances are tight, but you’re mentally ready to roll with an investment experience.
Professional management
Mutual funds hire smart investment experts to manage your money, and they have access to extensive research into companies,economic conditions, and market trends. Most people would have a hard time keeping track of a large number of investments in many different businesses; staying on top of that financial activity is part of the daily routine for the research staff of a mutual fund.
Liquidity
Liquidity refers to the ease with which you can buy or sell an investment. Buying or selling a particular stock or bond, especially one held by relatively few people, may be difficult. If you need cash in an emergency, this obstacle to turning your investment into legal tender can cause inconvenience and may cost you money. By contrast, mutual fund shares can be cashed in quickly at any time by redeeming them with the
managing company, usually at little or no cost.
Shareholder services
Many mutual fund companies offer a range of useful, sometimes valuable services to their customers. These may include
Check-writing privileges
Ability to invest, withdraw, or move money via mail, telephone,
or the Internet
Automatic investment via payroll deduction
Record-keeping for filing your income tax return
Access to research reports about companies, funds, and
economic trends
A fund’s prospectus tells you more about such services.

[meera krishna]

Mutual funds fall into three categories:

* Equity funds are made up of investments of only common stock. These can be riskier (and earn more money) than other types.
* Fixed-income funds are made up of government and corporate securities that provide a fixed return and are usually low risk.
* Balanced funds combine both stocks and bonds in the investment pool and offer a moderate to low risk. While low risk may sound good, it is also accompanied by lower rates of return-meaning you risk less, but your investment won't earn as much. You have to decide how much risk you're willing to take on before you invest your money.

so you have to know what to invest and where to invest before deciding on anything particular.

Some of the good funds in the market are from ICICI,Reliance and Franklin Templeton!