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What is Mutual fund?

Mutual fund is an investment option which pools investor’s money and invests in stock markets for generating better returns and diversifying risks. The collective holding of invested amount in mutual funds is called as portfolio.

It’s not an alternate to stocks, but its collectively investing minimizing the risk involved in stock markets.

Why invest in mutual funds?

Simple, to diversify risks it is recommended to invest in mutual funds rather than stocks where your investment is linked to one or two specific stocks. In mutual funds, the fund manager purchases many stocks from of the same sector, as well as diversifies the investment in different sector to broaden risks.

So even if one or two stocks fail, it does not affect the entire invested funds as the risk is minimized.

Individual’s Risk assessment for investing in mutual fund-

Risk Manager

A-18-30, 31-45, 46-60, 61-75, & >76

A-Less than 5%, 5% to 20% , more than 20%

A- 1year ,less than 2 years, 3 years to 5 years, & > 5 years

A-Fixed Deposit, Mutual funds, Bonds, Property, all the above

 i) Sell and immediate change to fixed income

ii)Wait for the market to improve

iii)Sell some investment and hold the rest

iv) Take advantage of the fall in value and invest more

Regular income, Moderate returns (better than FD), capital protection, High return

Immediately, after 1 month, after 3 months, not keen for investment