The words mutual funds are on everybody's lips but few know exactly what they mean. Nobody knows exactly whether they are like bonds or fixed bonds or if they are like shares in a company. Then there are questions that everybody really wants to know; is it possible to become millionaire overnight or to become a pauper by investing in mutual funds. To find the answer to your queries you must read the following write-up.

An asset management company manages the investment of a group of people who invest money that is pooled together with a common aim. The common aim can either be to have liquidity or have a regular income or to invest it for long term. Investors invest in a scheme that suits their specific needs and requirement. Out of the total funds, the investors pay a small amount to the asset management company or AMC for looking after their interest. This is the basic tenet for the working of mutual fund.

Small cap investors may not have the necessary knowledge to spread out in various fields that include both debt and equity products. Small investors looking for equity products generally do not have adequate money to disseminate the risks involved by buying various companies and different forms of security. Generally, small investors also find monetary resource insufficient to spread among cash, debt, and equity products.

Basically, investment companies that collect money from investors and later sell or buy them back on a constant basis, using the money raised to re-invest in securities of different companies are known as mutual funds. The write-up gives you an in-depth analysis to all your mutual fund related queries:

* If it is possible to diversify investment if invested in mutual funds?

* Knowing in details about the working of mutual fund

* Find out more in regards to the legal aspect in relation to the mutual fund

The New York Stock Exchange listed mutual funds as the most popular of all forms of security in the beginning of the last millennium out numbering all other investment types. Mutual funds have advantage over other forms of security because it provides diversification and liquidity at a cheaper rate than bonds and stocks. This is one of the oldest forms of security dating as far back as the 18th century. Holland was the first country that started this security as early as 1774.

It remains one of the oldest forms of security that people invest in and still maintains immense popularity today. The reason for popularity is not hard to seek; one of the main reasons behind the popularity is that it is relatively risk free. The investment of the money of the investors is spread across various sectors and securities, which provide it with insulation from market fluctuations. This diversification across sectors makes it relatively risk free. All sectors and all forms of security cannot fail at once. If a certain security of a company fails then the returns from other sectors balance it out.

If one goes by the performance of mutual funds, the perception that it is risk free is validated. This is in addition to other advantages that it already has. If you are a retail investor foraying into the market, you must consider investing in mutual funds.

Has your portfolio been savaged by this new edition of a 'Bear Market'? Are you feeling there's no end in sight and have no hope of recovering what has been lost? Well, there are solutions and I hope to offer a few here.

Make no mistake, we are in a longer term 'Bear Market' and there is no way of knowing when it will end. Having said that there are a number of strategies you can use to protect yourself, as outlined below.

1) Investor, Know Thyself The very first step in being a successful investor is having a good understanding of who you are. By that I mean you must know how much risk you are able to tolerate, financially, psychologically and emotionally. For example, if you have a $10,000 account are you able to experience a loss, even temporarily, of $1,000, $2,000, or more, less? If your portfolio of $100,000 slides to $90,000 of value, or $80,000, are you able to comfortably sleep at night? These types of temporary declines are very common in the stock market so you must understand in advance what amount of loss, if any, you are able to live with.

Solution: Carefully develop your investment portfolio to meet your personal risk tolerance. As a general rule you may reduce market risk by balancing your portfolio between a mix of stocks, bonds, and money market, and/or their mutual fund and exchange traded fund equivalents.

2) Are You Investing for Income, Future Growth, or Some Combination of Both? It is very difficult and increases risk to use your investment account to receive income while at the same time attempting to protect and even grow your principal. For example, if you are withdrawing 4% annual income from your account and it goes down 10% in market value in one year, your account is worth 14% less than what you started with. Imagine three years in a row of market declines, as happened 2000 - 2002.

Solution: Build two portfolios, one for growth and one for income. The growth account could be filled with stocks and or the equivalent mutual and exchange traded funds. The second account, designed for income, could consist of income annuities, corporate and/or municipal bonds, or their equivalent mutual and exchange traded funds.

3) Invest With Tax Consequences Firmly in Mind Don't let the tax tail wag the dog, but always build and manage your investment portfolio with strategies to minimize taxation. If your total return in one year is 9% and you give up 4% in taxes, you probably have not been as tax efficient as you could have been.

Solution: As much as possible use tax efficient strategies. For example you could place your income generating investments in municipal bonds, income annuities, and/or tax efficient vehicles like index income oriented mutual and exchange traded funds (ETF's).

4) What to Do in an Existing 'Bear Market'? Assess the damage, keep the better performers, and sell those that have generated the greatest losses. Don't wait for them to get back to break even and then sell, a common mistake made by many. They may never come back, or it may take so long that you will have missed many other opportunities in the meantime.

5) Keep Investment Costs Low Avoid buying investments that carry steep costs, many hidden from view. Front end loads, back end loads, markups, markdowns, internal expenses, surrender penalties and more await the unwary buyer.

Solution: If you are an accomplished self directed investor buy your investments through a discount brokerage firm like Schwab, TD Ameritrade, Fidelity etc. Buy only No-Load mutual funds, exchange traded funds, low transaction fee stocks and bonds. If you need guidance then at the risk of sounding self promotional seek out a registered investment advisor who works on a fee for service basis. This type of advisor has a fiduciary responsibility to place the interests of the client first and foremost, ahead of self interest and ahead of any financial services firm with which he or she may be affiliated.

6) Can You Protect Your Assets in a Long Term 'Bear Market'? I believe the answer is yes you can. You do not have to 'ride out' a long term 'Bear Market', watching helplessly as you lose 20%, 30% or more as has happened to so many in the past.

Solution: Buy quality, low to moderate risk investments. If the long term trend is down, as is currently the case, sell those getting hit the hardest, move to money market or even partially to 'inverse' exchange traded funds. 'Inverse' funds are designed to do opposite of the respective index so if the major indexes are trending down you can reposition part of your portfolio into inverse ETF(s) moving in the opposite direction, as they are designed to do.

Note: Nothing in the preceding paragraphs are to be construed as specific investment advice. It is meant only as a general guide to possibilities available to today's investor.

Successful online single players realize that one of the biggest hurdles to their success was to learn how to properly manage their bankroll, while at the same time building their skills. It's an often hard lesson to learn and for most of us tested our resolve time and time again, until really understanding and role management sunk in deeply enough to have an impact on our game.

But managing a bankroll doesn't necessarily come naturally when it comes to online poker. The fun and excitement of it all tends to get minds a wondering, and hopes a leaping, even for the most conservative of characters. Maybe though, we should think of ourselves as more conservative characters, like the blue suits who manage money every day as a way of life. Can we not take some lessons from market players who manage millions of dollars?

Think of yourself as an investment banker or mutual fund manager. Those professionals will only use a small portion of the money they manage and put it into higher risk opportunities. That doesn't mean high risk opportunities, it means managing investments properly with an inherent amount of risk and reward scenarios thoroughly analyzed.

They manage for long-term, annual returns. If you take this further and think about it, if you've ever seen a wildly high return percentage advertised for a mutual fund like 33% or something like that, then you pretty much know it was a fluke and that there is likely no way that fund is going to repeat that percentage the following year. You don't trust it. The same should be said for a poker player who makes it big early on in his online endeavours. You can't trust him to repeat it - because you know it is a fluke. He is a fish, burning to give it back.

There are bankroll management programs available online some of them free that can help you to this end. Using one of them can make your thinking process much more professional in terms of how you handle your online poker accounts. How often do you think a mutual fund manager says things like, let's let the whole thing right on this one stock I got a good feeling. I'm feeling really lucky about this stock, let's go for it. Let's just try and double up or get the heck out of its business. Let's move up because what we're doing so far isn't working.

For individuals just getting involved in the game of investing, there is a lot of wonder circulating around mutual funds. Certain questions such as, "What are the risks associated with mutual funds?" and "Are they a good investment?" are questions that are frequently asked amongst investors. However, it is good to ask these questions because asking questions about mutual funds shows that a person means serious business when it comes to investing. All investors want the best return they can possibly get on their investment, so exploring the many options available are important. When it comes to mutual funds, there are many options. That is why it is good to know at least the basics.

The basics

Mutual funds consists of money from many different investors that is pooled together and invested into short-term money markets, stocks, bonds, various other assets or securities, or maybe even a combination of any of these. Each investor owns a portion of the holdings that the fund possesses and the income that is generated from these holdings.

There are several factors that distinguish mutual funds from other types of funds. Those factors are:

- The shares are purchased from the actual fund instead of from other investors via such avenues as NASDAQ or NYSE.

- The purchase price is the price per share plus any fees imposed by the fund at the time. These are commonly referred to as shareholder fees.

- When selling the shares, you are selling them back to the fund.

- New investors are accommodated through the creation of new funds that can be sold to them.

- Investment advisors that are registered with the SEC are typically who takes care of mutual funds.

Advantages and disadvantages

There are advantages and disadvantages to mutual funds. The advantages include:

- Diversification of your portfolio - This is important in investing because a diversified portfolio has better earning potential.

- They are affordable - There is a high degree of affordability when it comes to mutual funds. Dollar amounts can be set low for purchases, giving lower income individuals the ability to invest.

- Managed professionally - There are professionals who are constantly monitoring the performance of these mutual funds and always looking for the best investments for the fund in order to maximize its return to its investors.

- Liquidity - Investors are able to redeem their shares at the current NAV. This is in addition to any fees or charges assessed at that time.

The advantages make it clear that a mutual fund can be a great investment, but like any type of investment there are some disadvantages that come along with them as well. Those disadvantages include:

- There are annual fees, charges for sales, and other fees associated with them. It doesn't matter how the fund performs. These costs still apply. Taxes also have to be paid on gains. This refers to any distributions received even if the fund performed poorly.

- Investors do not control their shares. The make-up of the portfolio is decided by the manager of the fund.

- There is uncertainty that surrounds the price of shares. It isn't like how you can follow regular shares of stock in real-time during trading hours. There is a delay in you finding out what your share is within a mutual fund since you are sharing the fund with other investors.

So now that you see the advantages and the disadvantages, you can decide which way to go. However, you have to weigh them against each other. An example: Although you don't have control, the fund is under professional control. Mutual funds have helped put money in people's pockets, so mutual funds can be a great way to invest for your future. Just make sure you find a fund that performs well.

Are you someone who is worried about where to invest your hard-earned money? Do you need ideas for investing? If you ask me, I would suggest Mutual Funds - for they give better returns than banks and are considerably less risky than stocks. For investing in mutual funds, consider the following points:

1. The first point before investing is to clearly identify what you need. Is it big returns or safety? Is it regular payments or aggressive growth? And so on..first prioritize your need. If it is still not clear, then consider various factors around you.

a. If your age is somewhere between 18 and 35 then you should look to be more aggressive and go for growth and big returns (for you have a long career to earn money..so choose more risky options)
b. If you are over 50 years old, then you must look to secure your regular source of income, so you should look for safer investments that will ensure payments regularly.
c. If you lie between 35 and 50 then you should go for specific needs that depend on various situations (like your children's education, your various other needs like a new vehicle, new house etc.) around you.

2. Once you have identified what your investment should give you, look out for the plans that best suit your objective. For the youngsters, there are various funds like emerging market funds, small cap funds etc., and for people who are over 50 there are options that pay dividends regularly and those that invest in government securities only and for the others there are various schemes like tax savers, education supporters etc.

3. After you are through with the second step, you must decide on a portfolio (or a mutual fund that provides a similar portfolio) to invest your money in. You must be a little careful in this step and choose the best and the safe ones. You must make sure that the portfolio is in line with your objectives and will be able to cater to your needs all the time.

Investing is an art. Investing in such a way as to not lose money is a talent worth cherishing. Not all are blessed with such a talent. However, it is quintessential (at least in recent times) to invest your money so that you participate in your economy's growth (and contribute something to it).

So how do you invest your money so that you don't lose anything whatever be the market condition? One way is to invest in mutual funds. Investing in mutual funds provides safety and assures return. And amongst the mutual funds, it is always better to go for money market funds. There has hardly been an investor who has lost money in these funds!

What is a Money-market fund?

A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. However, unlike a "money market deposit account" at a bank, money market funds are not insured federally.

Money market funds are regulated primarily under the Investment Company Act of 1940 and the rules adopted under that Act, particularly Rule 2a-7 under the Act.

How do these funds give you money?

The portfolio of these funds generally consists of government securities, commercial papers of highly rated companies, certificates of deposits and other low-risk securities in the money market. These funds generally invest in securities that have high liquidity. These funds aim to keep the Net Asset Value (NAV), which is the value that you get when you sell one unit of the fund, to be constant. However, the yield will move up and down.

What else do you get?

Money market funds are extremely liquid. They can be easily converted to cash. Its just like a deposit in a bank. To make it look just like that, most money-market funds have allowed check-writing facility. You can write a check on your money-market fund and just pay for whatever you want. Hence they are a serious competition to the banks!

Types of money-market funds

There are many different types of money-market funds. One of the most common type is the Treasury-only funds. These funds invest only in the government treasury bills and treasury bonds. This is the safest kind of fund. Another popular type is the Government-only funds. These funds invest in all forms of government securities including debt from government agencies. Apart from these there are many funds like prime funds, first-tier funds etc. Whatever may be the name, all these funds are of high quality and will promise to keep their NAV fixed regardless of what happens to any market in the economy.

One thing you must do before investing in a money-market fund is to carefully read all of the fund's available information, including its prospectus, or profile if the fund has one, and its most recent shareholder report. This is just to be safe.

Mutual funds have risen in popularity due to the fact that it is often considered by investors as a safe and effective means of generating money. A group of people or a company generally makes up a mutual fund and it is these people that handle the selling of the shares. When these investments are pooled together, they are then invested into a diversified selection of securities. In the end, you stand to gain your share of the money gained whilst minimizing the risks associated with investments.

Reasons for Investing in Mutual Funds
One of the reasons why you should start investing in mutual funds is the professional management that you can get from it. If you are a beginning investor or an avid investor that just doesn't have time to manage their investments, you can rest all these to a professional who can handle your assets for you. In a mutual fund, there is a professional who can handle securities, analysis, and even questions on the right time to buy or sell stocks and bonds. This proves to be beneficial to a lot of investors that it has become the largest financial intermediary in the United States alone.

When you invest with a mutual fund, you are given the ease of selection through just a click of a mouse. There are hundreds of different types of mutual funds available for your consideration. You should research on which type works best for you as an investor. What you should be looking out for is a particular type of mutual fund that has fewer risks, gains you the amount of money you want, and the period of time you are willing to wait. You can easily communicate these to your fund manager who can adjust your investments according to your preferences.

Not only investors and those nearing retirement can benefit from a mutual fund, the young generation can, too. Those single individuals or single parents or young individuals who just want to start all over again can do so with a mutual fund. Mutual funds accept small investments even those under a thousand dollars. Though you start small, there are dozens of investors who pool their investments together with yours, all for one purpose, to make more money.

A mutual fund allows you to invest yet rest in knowing that your investments remain safe. A mutual fund offers low risk in managing your investments simply because of diversification. Since a mutual fund engages in different types of securities or investment strategies, your risk of losing money is lessened. If one strategy doesn't work or falters, you still have other strategies that are working to gain you more money.

What's more is that with a mutual fund, your opportunities for earning more money is increased compared to investing on your own. When you invest with a mutual fund you reach more opportunities and diversification much more than you could have done when you are on your own.

Lastly, investing with a mutual fund offers convenience and protection for you as an investor. You can sell your liquid assets quickly and easily through a mutual fund which means that you can earn and get your money in just a matter of days. You also do not stand to lose money to other shareholders since you possess certain rights being a shareholder yourself. Try investing in mutual funds and experience the ease and safety of investing

One of the best aspects of mutual funds is that with each investment, there is instant diversification. Diversification is important for all investors because it reduces risk. It is important to take risks when investing because without risk, you won’t make very much money.


For example, putting your money in a traditional bank account has little to no risk (as long as it is within the $100,000 FDIC insured), but at 1% or less, you will make next to nothing. You do need to take risks when investing. The younger you are, the more risk you should take.


Diversifying your investments eliminates a lot of the unnecessary risk that comes with investing. If you invest $100,000 in one company and it loses 5% for the year, you just lost $5,000. If instead you invest $20,000 in 5 different companies and they earned -5%, 2%, 16%, 8%, and 9%, you would have made an average return of 6% and made $6,000. It wouldn’t be as big of a deal that you lost 5% because you gained in the others.


Mutual Funds Work through Diversification


Mutual funds are able to include hundreds of investments in stocks, bonds, currency, and other securities. How are they able to include such a wide array? Essentially, you are buying tiny pieces of each investment. You would not normally be able to do this with a brokerage firm, but the unique aspect of a mutual fund allows you to do just that.


A mutual fund takes a large group of investors. Each investor is interested in investing in a certain type of investments. The mutual fund collects to money from the investors and uses it to purchase many shares of whichever stocks they choose. They then turn around and issue a share of the mutual fund to the investor containing many pieces of other stocks.


If you were wealthy, you would easily be able to invest in many different companies and have someone manage your portfolio for you. Unfortunately, most of us aren’t very wealthy, and we must start small. Mutual funds are the perfect solution because they protect your investment by instantly diversifying your portfolio.


If you want to start investing money now, but you don’t know much about investing, you should try mutual funds. Even if you start learning and studying up on how to invest, you can invest in your own stocks later, but still start investing now so you start earning money as soon as possible.

How are mutual funds different from stocks and bonds?


If you buy a share of stock, you own part of that company. For every share you buy, your ownership increases. Stocks are equity investments because you have equity in the company. In order to make money with stocks, you have to sell your stock at a higher price than you purchased it for a capital gain.


If you buy a bond, you have lent money to the company for a specified period of time. You do not own any of the company. In order to make money with bonds, you lend money to the company, and every year or six months, they pay you interest. When the time is up and your bond has reached maturity, the company repays the money you lent them. You also have the option of selling the bond before maturity.


A mutual fund is simply a mix of stocks, bonds, or both. They often include other investments as well such as derivatives. A large amount of people pool their money together and purchase a wide variety of securities. This allows those with little to invest to be able to diversify their portfolio.


Instead of buying shares of stock in one company or a handful of companies that you choose, or buying bonds of different companies, you buy shares of a mutual fund. A fund manager assigned to that mutual fund manages the portfolio and chooses the investments. You make money similarly to stocks by selling your mutual fund shares for a gain.


Which should you invest in?


You may be wondering why you would invest in a mutual fund if you could just buy the stock or why you would buy the stock or bonds if you could just invest in the mutual fund. Basically, you are wondering why you would choose one over the other when they include the same things.


One benefit of a mutual fund is that if you have a small amount of money, you will be able to diversify your portfolio. For example, if you want to invest $1,000, you may only be able to invest in a few different companies because you can only buy whole shares of stock. Similarly, if you want to buy a bonds, you would probably only be able to buy one, which would be risky in that you’d either get a very low rate of return, or lose all your money if the bond turned bad.


A mutual fund is foolproof diversification. You don’t have to choose the right stocks or bonds, which leads us to the next point. If you are the average person and don’t have a college degree in finance, it’s likely you don’t know much about investing. If you don’t know how to research and pick stocks, you are probably wary of your own choices, worried that you might lose money.


With mutual funds, a fund manager makes the choices, so you can feel a little more confident in the chosen stocks. Also, you can see a funds past performance when choosing a mutual fund. This helps give you a little more piece of mind.


Ultimately, mutual funds are great for the average person who doesn’t have a lot of money to invest, a lot of knowledge about investing, or the time to spend choosing investments and managing a portfolio.

What is a no load-fund mutual fund?


A load is essentially a commission you pay on the mutual fund. With a no-load mutual fund, you don’t have to pay a commission for your mutual fund because it is distributed to you directly from the investment company.


Load mutual funds usually charge you a percentage of your return. For example, they might charge you a 3% commission. If you make a 6% return, you only get 3%. This is an example of a back-ended fund because the commission is taken out of the proceeds. This is slightly better than a front-end fund because the fee you pay has had time to earn money. With a front-end fund, you pay the 3% up front and that money has no chance to earn any money.


From first impressions, you assume a no-load fund is superior because you don’t have to pay a fee, and most often, this is true. Think about it; if you invest in a load fund that’s making a 12% return, that’s great. It’s also more than 8% that maybe another no-load fund is making, but if the load commission is 5%, you’d still be making more with the no-load fund.


Just because it’s a load fund, doesn’t mean it will earn you more money.


With many things in life, we often think that the more it costs, the better it is. This is often not the case. In fact, some colleges raise their tuition just to get more people to enroll because they think that with a higher price, they have increased the value of their education. In actuality, they’ve changed nothing about their teaching.


Also, even with the experience and knowledge fund managers have, it is impossible for them to always find the perfect stocks that will make the most money. The stock market, or any market for that matter, is impossible to predict. While they can make predictions of what a stock will do based on the past and technical information, it’s still possible that you could choose stocks randomly from the paper and have a better return.


Financial knowledge and research will help in investing, but over the long haul, it’s very possible you will probably earn at least the same amount with no-load funds or even more, than with load funds after commissions.


What should you choose?


Unless you are very confident in a load fund, I suggest going with a no-load fund. You will at least save some money up front.

What is a no load-fund mutual fund?


A load is essentially a commission you pay on the mutual fund. With a no-load mutual fund, you don’t have to pay a commission for your mutual fund because it is distributed to you directly from the investment company.


Load mutual funds usually charge you a percentage of your return. For example, they might charge you a 3% commission. If you make a 6% return, you only get 3%. This is an example of a back-ended fund because the commission is taken out of the proceeds. This is slightly better than a front-end fund because the fee you pay has had time to earn money. With a front-end fund, you pay the 3% up front and that money has no chance to earn any money.


From first impressions, you assume a no-load fund is superior because you don’t have to pay a fee, and most often, this is true. Think about it; if you invest in a load fund that’s making a 12% return, that’s great. It’s also more than 8% that maybe another no-load fund is making, but if the load commission is 5%, you’d still be making more with the no-load fund.


Just because it’s a load fund, doesn’t mean it will earn you more money.


With many things in life, we often think that the more it costs, the better it is. This is often not the case. In fact, some colleges raise their tuition just to get more people to enroll because they think that with a higher price, they have increased the value of their education. In actuality, they’ve changed nothing about their teaching.


Also, even with the experience and knowledge fund managers have, it is impossible for them to always find the perfect stocks that will make the most money. The stock market, or any market for that matter, is impossible to predict. While they can make predictions of what a stock will do based on the past and technical information, it’s still possible that you could choose stocks randomly from the paper and have a better return.


Financial knowledge and research will help in investing, but over the long haul, it’s very possible you will probably earn at least the same amount with no-load funds or even more, than with load funds after commissions.


What should you choose?


Unless you are very confident in a load fund, I suggest going with a no-load fund. You will at least save some money up front.

Mutual Funds are Securities


Securities are investment instruments. They represent ownership or a debt agreement. Securities include: stocks, bonds, options, futures, and mutual funds. Investment securities are purchased by investors in hopes of earning money. Depending on the security, they may either sell it for a capital gain or loss, or they will collect interest on it such as with bonds. Some derivatives also have more complicated ways of earning money, but we will stay simple.


A Mutual Fund is a Collection of Other Securities


A mutual fund is not quite the same as other securities such as stocks and bonds. It is made up of other securities. A mutual fund has a fund manager who buys and sells stocks and bonds to include in the mutual fund.


Hundreds even thousands of investors who decide they want to own part of the fund will purchase shares of the mutual fund and all their money is pooled together. The fund manager uses the money to buy a wide variety of securities and passes the ownership onto the investor.


Perfect for the Average Person


If you don’t know what a mutual fund is, chances are you aren’t very well versed in investments. If you don’t fully understand stocks and bonds, you might not know how to choose successful ones. With mutual funds, the fund manager picks the stocks, so you don’t have to worry about spending any time researching stocks.


This doesn’t mean that you will automatically earn a high return because an expert is running your portfolio. The stock market is always risky. What this does mean is that you get a well diversified portfolio without having to purchase many stocks that you choose.


Perfect for the Not-so-Wealthy Yet


For many people, buying 100 shares of stock at a time is just not possible. Even if they were able to afford the stock, they would only own stock of one company which is not diversified. Diversifying reduces risk of your portfolio, protecting your investments.


For example, if you bought 100 shares of Google and Google suddenly tanked, you would lose all of your money. On the other hand, if you owned 10 shares of Google and 90 shares of 9 other stocks and Google tanked, you would lose the value of those 10 shares, but hopefully most of the other stocks’ values went up offsetting the Google loss.


If you can only afford to invest $1,000, a mutual fund is perfect for you because you can invest in stocks and maintain a diversified portfolio.


Fund Managers know More than You


It’s impossible to know exactly what is going to happen in the stock market, even if you are a professional. Still, a mutual fund manager knows a lot more than you about stocks and investing and is likely to, at least, be able to maintain a comfortable return on your investment. Hopefully, you will be more assured by your investments when someone who has experience in the market is managing your portfolio.

You should be investing your money. It's as simple as that. Instead of wasting your cash on coffee and itunes you should be buying stocks, bonds, and other securities. You might think it's easier said than done, but it actually is pretty easy to do. Once you get the willpower to start saving your money and have money to invest, you can start researching the best investment for you.

Most likely, if you are not investing yet, you probably don't know much about investing. Lucky for you, you don't need an MBA in Finance or even have to know what an MBA is to start investing. If stocks give you headaches and bonds are nothing more than the $50 savings bonds from your Grandma to you, you do have another choice.

Stocks, bonds, and other investments will be much more successful if you do your research, but if you don't have the time or skill to do this, you should invest in mutual funds. A mutual fund is when a whole bunch of people pool their money together and a professional money manager invest it into hundreds of stocks and bonds. Basically, you give your money to someone else and they invest it for you.

Sound expensive? It can be, but it doesn't have to be. There are load funds that charge lots of fees, but you can get no-load fees that charge nothing, hence the name 'no-load'. Just because they don't charge fees doesn’t mean they are bad investments either. With mutual funds that charge a commission, you lose a percentage of your earnings where as with no-load funds, you get all of your return. So even if the loaded fund has a higher return, you might still be making less with it.

Stock investing can be risky. If you only have a small amount of money to invest, you are likely to end up only investing in a couple stocks which will greatly increase the risk of your investments. If you only have $1,000 to invest, you can diversify your portfolio automatically by investing in a mutual fund. Diversifying your stock will decrease risk because if one stock goes down, it's likely another stock will go up and at least offset it. Basically, you are reducing the risk that your entire portfolio will decrease in value.

Investing in mutual funds is perfect for the ordinary person who doesn't know much about investing and only has a little bit of money to start investing. Even if you don't have $1,000 right now, Sharebuilder will let you invest $100 a month in an automatic investment plan until you reach the $1,000 minimum. Start investing right now!

The mutual funds in India were buffeted from the meltdown in the Wall Street and its impact on the Indian stock market. The foreign Asset Management Companies, or AMCs, had to deal with another factor. Many mutual fund investors in India were anxious whether their investments in the foreign AMCs were safe, particularly when Lehman went for bankruptcy and AIG's fate was also not decided. There are worries on more Wall Street firms going under.

India has a sizable presence of global AMCs including Fidelity, HSBC, and Morgan Stanley. There are also foreign partners in AMCs, including Merrill in DSP Merrill Lynch, and Sun Life in Birla Sun Life.

But the investors can be assured of their investments in foreign AMCs. Of course, their investment in mutual funds in India has the market risk per se from the fortunes of the stock market or debt markets.

The structure of the mutual funds safeguards the investors in case an AMC falls. The AMCs just manage the money. The creditors of the AMC do not have any right over the investors' money. The AMC just acts as an investment manager of the mutual fund and gets fee-based income on it. The AMC takes investment decisions according to the scheme objectives.

Another entity, the Custodian, has the role of safekeeping of securities and it has no role in asset management. The Custodian is appointed by the Trustees, who are group of persons that have supervisory authority over fund managers. The Trustees of mutual funds in India also ensure that the fund managers stick to the trust deed and the assets of the funds are held safely. The Trustees also perform other supervisory role.

The mutual fund is set up by a sponsor who works closely associated with the AMC. The regulations of the mutual fund regulator, SEBI, require that the Sponsor has to contribute a minimum percentage to the net worth of the AMC.

The Board of Directors of an AMC are normally elected each year at the annual meeting and act on behalf of the shareholders.

So the different levels of supervision in a mutual fund delink your investment from that of the bankruptcy of the AMC. Still, we wish all the foreign AMCs a good luck as they battle the Wall Street storm.

Of course, the creditors have the AMC have rights over the assets of the AMC like its offices. But not over the investors' money.

Are all your worries over from investment in mutual funds? Not exactly, says French bank BNP Paribas. The global markets, including those in India, have not bottomed out yet, it says. But on the positives it says that it expects the Reserve Bank of India to hold rates for the next six months on concern over growth rates. Hopefully, some respite for realty, banking and other interest-rate sensitive counters. BNP Paribas sees Asian banks untouched from the global credit crisis.

As of now, the bank remains underweight on commodities. But still the French bank is worried over how he rescue plans of US Treasury Secretary Henry Paulson and Fed chief Ben Bernanke's will hold off another crisis.

If you understand how to invest in mutual funds you can easily find a way to improve your finances. Everyone wants easy money. If you have money sitting around and are not using it, it is natural to turn to the stock market as an investment option.

Unfortunately the stock market is fickle and it is far too easy to loose money if you don't know what you are doing. Most people have no idea where to start, let alone how to actually make money.

The amount of research needed to make good investment choices is overwhelming. Fortunately small investors no longer need to do this research. Mutual fund providers do the research for you and present a range of options you can understand.

With managers and brokers who understand the current markets and who understand how to take advantage of it, mutual funds give investors an upper edge in investment. Those who choose the stocks that make up the funds keep up-to-date with all the information and make choices to make their mutual fund the most profitable to all involved.

Some mutual funds wind up costing investors a lot of money. Managers and brokers take fees to pay for their expertise. When investing, it is smart to look for a no penalty mutual fund to minimize extra fees.

No load funds are in fact just as good as mutual funds where you can expect to pay fees. Sometimes they are even better. Having extra fees does not make your investment any more secure or productive.

There is an amazing amount of information available for those who are looking to invest. You can find information in books and articles from magazines and financial journals. Newspapers often discuss investment information in their financial pages. There are many websites and other internet sources with lots of investment information. Many mutual funds also offer pamphlets to read at no cost. By researching you can learn all about your investment possibilities.

It is very important to read up as much as you can before investing. It is your knowledge that will help you find a mutual fund that suits your needs.

Tips on hidden fees and unseen risks will help you understand what goes on behind the scenes in the mutual fund world. You can avoid many pitfalls by researching carefully. There is also a lot of information on the history of individual companies and funds and you can track their performance to see their track record.

It is easy to buy into a mutual fund once you find one that suits your needs. With lots of information available you can be in charge of your investment choices and know how to invest in mutual funds effectively.

Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the unitholders.

Mutual funds have their drawbacks and may not be for everyone:

No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.


Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.


Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.


Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

The advantages of investing in a Mutual Fund are:

Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.


Professional Management:Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.


Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.


Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.


Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.


Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index


Transparency


Flexibility


Choice of schemes


Tax benefits


Well regulated

With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organisation. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows:
This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry.


It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.


AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.


Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.


It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.


AMFI undertakes all India awarness programme for investors inorder to promote proper understanding of the concept and working of mutual funds.


At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

The sponsorers of Association of Mutual Funds in India

Bank Sponsored

SBI Fund Management Ltd.
BOB Asset Management Co. Ltd.
Canbank Investment Management Services Ltd.
UTI Asset Management Company Pvt. Ltd.

Institutions

GIC Asset Management Co. Ltd.
Jeevan Bima Sahayog Asset Management Co. Ltd.
Private Sector

Indian:-
BenchMark Asset Management Co. Pvt. Ltd.
Cholamandalam Asset Management Co. Ltd.
Credit Capital Asset Management Co. Ltd.
Escorts Asset Management Ltd.
JM Financial Mutual Fund
Kotak Mahindra Asset Management Co. Ltd.
Reliance Capital Asset Management Ltd.
Sahara Asset Management Co. Pvt. Ltd
Sundaram Asset Management Company Ltd.
Tata Asset Management Private Ltd.
Predominantly India Joint Ventures:-
Birla Sun Life Asset Management Co. Ltd.
DSP Merrill Lynch Fund Managers Limited
HDFC Asset Management Company Ltd.
Predominantly Foreign Joint Ventures:-
ABN AMRO Asset Management (I) Ltd.
Alliance Capital Asset Management (India) Pvt. Ltd.
Deutsche Asset Management (India) Pvt. Ltd.
Fidelity Fund Management Private Limited
Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
HSBC Asset Management (India) Private Ltd.
ING Investment Management (India) Pvt. Ltd.
Morgan Stanley Investment Management Pvt. Ltd.
Principal Asset Management Co. Pvt. Ltd.
Prudential ICICI Asset Management Co. Ltd.
Standard Chartered Asset Mgmt Co. Pvt. Ltd.

Association of Mutual Funds in India Publications

AMFI publices mainly two types of bulletin. One is on the monthly basis and the other is quarterly. These publications are of great support for the investors to get intimation of the knowhow of their parked money.

Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.


By Structure
Open - Ended Schemes
Close - Ended Schemes
Interval Schemes


By Investment Objective
Growth Schemes
Income Schemes
Balanced Schemes
Money Market Schemes


Other Schemes
Tax Saving Schemes
Special Schemes
Index Schemes
Sector Specfic Schemes