Is mutual fund better?!

Mutual Funds

Mutual funds are the ideal place to invest small amounts of money because you can buy a mutual fund without direct trading costs. For example, if you put Rs.1,000/- in to a stock each month for a year, you will end up paying at least Rs.135/- in commissions to a broker. So out of Rs.12,000/- invested, only Rs.10,380/- goes to work for you-an automatic loss of 13 percent. But when you invest Rs.1,000/- a month directly with a fund, the entire Rs.12,000/- goes to work!!

Mutual funds are safer than you think. Mutual fund prices are driven by the price changes of the securities it holds- the fund is only as risky as the type you choose. Banks and insurance companies can go bankrupt but, by definition, mutual fund companies cannot. Once you understand inflation, average returns of different types of investments and compound interest, you may ralise you are taking a bigger risk by tying your money up with low-producing products like savings accounts.

A dedicated team of professionals is better than a single individual picking stocks.

The beauty of a mutual fund is that you don't need to be an expert on the thousands of stocks that it buys. Diversification (investing in various types of stocks) helps keep your returns up and risk down.

Investing in mutual funds is not hard. It can be as simple as filling out an application and mailing it in with a cheque. However, knowledge is power and if you desire to understand mutual funds and make smart investing decisions, call an agent now.

This content is taken from some books.