Why Mutual Funds

Why Mutual Funds



Unless you are willing to devote a lot of time and effort to research, the best way to invest in equity is through equity mutual funds.

Different cars suit different drivers. Those driving on country roads prefer the ruggedness of SUVs whilst city dwellers prefer the convenience of sedans. The answer is quite the same for investors - certain types of investors are better suited to mutual funds whilst others may do better with stocks. Stock investing requires greater time from the investor and more application of mind than fund investing. Investors with small investible amounts, generally less than 1.5 lakhs INR a year may not be able to achieve the same level of diversification through stocks that a fund will give them. For these types of investors, there is no better answer than mutual funds.



A mutual fund is a financial intermediary, set up with the goal of professionally managing money pooled from a large number of investors. By pooling money together in a mutual fund, investors can enjoy economies of scale. Instead of each investor trying to undertake his or her own investment research, a team of professionals can do so for them together. Mutual funds are run by mutual fund companies, also known as Asset Management Companies (AMCs). Each AMC operates a number of funds suited to different types of investment needs.
For the individual investor who doesn’t have much time to study and research investments himself, mutual funds are one of the best options for reaping the benefits of different types of investments with minimum effort and at a low entry point. In most funds, it is possible to start investing with as little as a thousand rupees or even less. Also, unlike many other investments, mutual fund investments are highly ‘liquid’. ‘Liquid’ means an investment can generally be withdrawn without any delay.

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