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"WHY INVEST IN MUTUAL FUND????"
BY
PROF. NISHA SINGH (USA)
and
PROF.ASHOK SINHA (INDIA)
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market [url=http://www.mxitcms.com/abercrombie/]abercrombie[/url] instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a Mutual Fund.
There are various investment avenues available to an investor such as real estate, bank deposits, post office deposits, shares, debentures, bonds etc. A mutual fund is one more type of investment Avenue available to investors. There are many reasons why investors prefer [url=http://www.jitneyhack.com/Classifieds/index.php?item/126776]moncler pas cher How To Put Together A Professiona[/url] mutual funds. Buying shares directly from the market is one way of investing. But this requires spending time to find out the performance of the company whose share is being purchased, understanding the future business prospects of the company, finding out the track record of the promoters and the dividend, bonus issue history of the company etc. An informed investor needs to do research before investing. However, many investors find it cumbersome and time consuming to pore over so much of information, get access to so much of details before investing in the [url=http://www.achbanker.com/hollister.php]hollister[/url] shares. Investors therefore prefer the mutual fund route.

They invest in a mutual fund scheme which in turn takes the responsibility of investing in stocks and shares after due analysis and research. The investor need not bother with researching hundreds of stocks. It leaves it to the mutual fund and its professional fund management team. Another reason why investors prefer mutual funds is because mutual funds offer diversification. An investor's money is invested by the mutual fund in a variety of shares, bonds and other securities thus diversifying the investor's portfolio across different companies and sectors. This diversification helps in reducing the overall risk of the portfolio.
Mutual Funds in India follow a 3-tier structure. There is a Sponsor (the First tier), who thinks of starting a mutual fund. The Sponsor approaches the Securities and Exchange Board [url=http://www.mnfruit.com/doudounemoncler.php]moncler pas cher[/url] of India (SEBI), which is the market regulator and also the regulator for mutual funds.
Not everyone can start a mutual fund. SEBI checks whether the person is of integrity, whether he has enough experience in the financial sector, his net worth etc. Once SEBI is convinced, the sponsor creates a Public Trust (the Second tier) as per the Indian Trusts Act, 1882. Trusts have no legal identity in India and cannot enter into contracts, hence the Trustees are the people authorized to act on behalf of the Trust. Contracts are entered into in the name of the Trustees. Once the Trust is created, it is registered with SEBI after which this trust is known as the mutual fund.

It is important to understand the difference between the Sponsor and the Trust. They are two separate entities. Sponsor is [url=http://www.mnfruit.com/airjordan.php]jordan[/url] not the Trust; i.e. Sponsor is not the Mutual Fund. It is the Trust which is the Mutual Fund.
The Trustees role is not to manage the money. Their job is only to see, whether the money is being managed as per stated objectives. Trustees may be seen as the internal regulators of a mutual fund.

and#8195;
BENEFITS OF INVESTING IN MUTUAL FUNDS
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments [url=http://www.jordanpascherofficiele.com]air jordan[/url] to achieve the objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs [url=http://www.rtnagel.com/airjordan.php]nike air jordan pas cher[/url] for investors.
Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value [url=http://www5c.biglobe.ne.jp/~suzurann/yybbs/yybbs.cgi]lancel pas cher Buying a Home[/url] related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
Transparency
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.
Flexibility
Through features [url=http://www.tlxfbzx.net/E_GuestBook.asp]barbour pa[/url] such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs [url=http://www.mquin.com/gzparis.php]giuseppe zanotti[/url] and convenience.
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the [url=http://www.sandvikfw.net/shopuk.php]hollister sale[/url] benefit of its investment strategy.
Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI
.TYPES OF RISK IN MUTUAL FUNDS
Market Risk: Market risk exposes you to a potential loss of principal. In all likelihood the market value of a stock will fluctuate based on factors such as developments affecting the company's financial status, earnings of the company or impact of economic slowdown on the company. Likewise, debt funds too are subject to market risk. Prices of bonds and government securities fluctuate with change in interest rates.

One can minimize [url=http://www.jordanpascherofficiele.com]air jordan pas cher[/url] market risk by diversifying among a variety of instruments [url=http://www.mquin.com/gzparis.php]giuseppe zanotti sneakers[/url] rather than investing your money in one or two stocks. Diversification helps minimize risks. Thus, when one asset class is adversely affected by market or other conditions, another class may be less affected. Because mutual funds invest in a lot of companies, they are the best way to diversify.

Interest Rate Risk: The risk that the value of a fixed income security will drop as interest rates rise. Government security prices are inversely related to interest rates. If interest rates decline then the prices of securities increase and vice versa. This risk cannot be avoided.

Inflation Risk: the risk that the return on your investments will not keep pace with rising consumer prices. Conservative instruments like debt funds provide less return over time and are more prone to the inflation risk.

Though this risk cannot be avoided one can manage it by investing a small portion in equity mutual funds. Equity funds always provide higher returns over a period of time. In comparison, debt funds give less return.

Business Risk: the risk that a company issuing a security may not be financially sounds due to factors like poor management, low product demand, or huge operating expenses. Such situations can result in a decline in [url=http://www.mxitcms.com/tiffany/]tiffany[/url] the security's value.
Since mutual funds invest in a variety of companies, the effect of such a risk spreads out.
Credit Risk: the risk that an issuer will default on a fixed income security by failing to pay interest or principal when due. Most of the bond instruments are rated by rating agencies. The higher the rating given to the bond, the higher is the credit quality implying low credit risk and vice versa.
This risk can be limited by investing in mutual funds having a high exposure to quality paper. Rating of AA/AAA denotes high credit quality.

Political Risk: the risk that political events may unfavorably influence the value of a security. Other political risks could include wars, change in government etc.
Political risks cannot be avoided. However, no two companies will be affected [url=http://www.mquin.com/saclancel.php]lancel pas cher[/url] in a similar manner when any change in law or a new legislation takes place.

Liquidity Risk: the risk that a mutual fund's underlying securities cannot be sold at a fair price when the need arises. Hence marketability of a security is a very important consideration.

One can minimize liquidity risk by investing in actively traded companies. In mutual funds, invest in an open-ended scheme as you can enter and exit at your own convenience. Close ended funds do not give you an option to exit at your convenience.

Timing risk: the risk of buying or selling a security at the wrong time. For example, there is the chance that a few days after you sell a fund it will go up in value or decline in value of a fund after you buy it.
The best way to counter market timing is to invest systematically. You can actually take advantage of short-term market volatility by investing a fixed amount on a regular basis to build a portfolio over a time period. This approach, called rupee-cost averaging, lets you buy more mutual fund units when NAVs are low and fewer units when NAVs are high.
and#8195;
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'WHY INVEST IN MUTUAL FUND????'Article Summary: Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.The best way to counter market timing is to invest systematically. You can actually take advantage of short-term market volatility by investing a fixed amount on a regular basis to build a portfolio over a time period. Mutual have low risk and comparatively better return in due course.
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