About Mutual Funds

To invest in mutual funds, you need to first understand what they are, and how they work.

Even more basic is your grasp of stocks and bonds. Very quickly, stocks stand for shares of ownership in a public company, and bonds are money lent to the government or company, on which you receive interest. We are presently concerned with these instruments, since most mutual funds invest in stocks and/or bonds.

Simply, mutual funds act as intermediaries and facilitate investments in various securities (stocks and bonds). The logical question here would be: why do I need a mutual fund? Why can’t I just invest directly?

The mutual fund advantage

Investing in a mutual fund allows you to minimise risk and maximise returns, because it acts as a middle man for a group of investors with a shared and predefined investment objective. If your main objective is security in investment but you don’t know how to begin, a mutual fund is one way to go.

Typically, a fund manager will maintain the fund, and since you are one shareholder in the fund, you have the added advantage of easy investment, and lower trading costs