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What Are Mutual Funds?

Mutual funds are when investors combine their investment money with other investors’ and invest in a collection of stocks, mortgages, bonds, etc also known as security. If a person wants to invest their money but he doesn’t really have the knowledge about where to invest and when you can simply take your money to a fund house where you’ll be given many categories of shares to choose from. You can choose the ones that suit you best and then the fund manager at the fund house decides where to invest that money.


For many reasons, mutual funds are considered the best type for the investors who’re just getting into investment and are beginners, as well as for professional managers of money.
For instance, it spares you from the extensive research that you’d have to do if you were investing on your own as it is being handled by professionals. They’re responsible for the selection, buying, selling stocks, etc. Also, as it’s all managed by a professional, the risk of loss is reduced considerably.

Another benefit is that your money is pooled with other investors’ money and so you can invest in big stocks and in return, get more profit.
As your investment is combined with that of others, you don’t really need a lot of money to start with. You can invest as little or as much as you want and progress with time.
Your money is also invested in a number of different stocks, bonds, etc and not just in a single or few stocks which are mostly of great benefit to investors.

It is also very easy to take back your money whenever you need them. You’ll be given money according to your current net asset value.


There are hardly any disadvantages of mutual funds. The main one would be the tax that you have to pay on your earnings or capital gains. But it is only after a certain limit and that too, isn’t much.

The other is that some companies charge a fee that is labelled as 12b-1. But not all companies charge it and not on all mutual funds. There are many who don’t. So you can easily select the ones that don’t and invest in there.

What Are Mutual Funds?

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