MUTUAL FUNDS ANYONE?

AS PROMISED IN THE LAST POST WE ARE GOING TO TAKE UP THE MUTUAL FUND ISSUE TODAY.

SO WHAT EXACTLY ARE MUTUAL FUNDS ?

LETS FIRST UNDERSTAND WHAT THE TERM ITSELF STANDS FOR.
MUTUAL FUND IS AN AGREEMENT OR PACT BETWEEN YOU AND A FINANCIAL INSTITUTION.YOU MUTUALLY AGREE TO DEVELOP A FUND IN ORDER TO INVEST IN SHARES AND REAP BENEFITS.

IF ALL THIS IS GOING WAY ABOVE YOUR HEAD THEN LETS MAKE IT EASIER WITH A PERFECT ANALOGY .

SUPPOSE YOU HAVE A CAR OF YOUR OWN.

1.YOU CAN EITHER DRIVE IT YOURSELF OR APPOINT A DRIVER FOR THE SAME.

2.WHEN YOU DRIVE YOURSELF YOU HAVE THE LIBERTY OF DRIVING AT YOUR PACE BUT YOU EVEN NEED TO BE OVER-CAUTIOUS BECAUSE YOU ARE AT MAXIMUM RISK.

3.ON THE OTHER HAND IF A DRIVER IS AT THE WHEEL YOU ARE AT A LESSER RISK,AND YOU EVEN ENJOY THE BENEFIT OF HIS EXPERTISE AT DRIVING.

4.HIS EXPERTISE i:e HIS DRIVING SKILLS COME AT SOME COST AND YOU HAVE TO BARE THE EXPENSE.

IN OUR CASE

1.CAR STANDS FOR YOUR INVESTMENT,YOU CAN EITHER INVEST IT AS YOU LIKE OR APPOINT A FINANCIAL ADVISER FOR THE SAME.

2.YOU DRIVING THE CAR IS SYNONYMOUS TO YOU INVESTING IN STOCKS DIRECTLY.

3.APPOINTING A DRIVING IS AS GOOD AS APPOINTING A FINANCIAL ADVISER TO HANDLE YOU INVESTMENT.

4.THE DRIVER'S SALARY IS SAME AS THE EXPERTISE FEE YOU NEED TO PAY YOUR FINANCIAL ADVISER.

SO IN CASE OF MUTUAL FUNDS YOU INVEST WITH A FINANCIAL INSTITUTION,WHICH IN TURN INVESTS IN STOCKS AND AT THE END YOU BOTH TRY AND EARN PROFITS.

VARIOUS INSTITUTIONS LIKE UTI, DSP, SUNDARAM , FRANLIN TEMPLETON, SBI , RELIANCE , etc HAVE VARIOUS SCHEMES OF MUTUAL FUNDS LINED UP FOR VARIOUS TYPES OF INVESTOR.WE WILL TRY GOING DEEPER IN THIS MUTUAL FUND IN COMING POSTS.