Mutual fund explained in Malayalam

Mutual Fund is a professionally managed investment fund that collects money from many investors to buy securities.

Mutual funds have both advantages and disadvantages compared to direct investment in individual securities like stocks. The advantages of mutual funds include economies of scale, diversification, liquidity and professional management. However, these come with charges and costs of mutual funds.

Mutual Funds are often classified based on their main investment : money market funds, bonds or fixed income funds, stock funds or equity, or hybrid funds.

Mutual funds are regulated by government agencies like SEBI and are obliged to publish information, including performance, comparison of performance to benchmarks, loaded charges and securities held. SEBI frequently brings rules to make it more safer for investors.

Advantages of mutual funds

• Greater opportunity for diversification: A mutual fund diversifies by holding in many asset classes and within same asset class. This diversification decreases the risk.
• Professional investment management: Mutual fund houses or asset management companies hire portfolio managers to supervise the investments of the Fund.
• Ability to participate in investments that may be available only for larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
• Service and convenience: Funds often provide services, such as verification writing.
• Government Supervision: Mutual Funds are regulated by a Government Agency ie SEBI in India.
• Transparency and ease of comparison: All mutual funds should inform the same information to investors, which makes them easier to compare each other.

Disadvantages

There are a few disadvantages also for mutual funds. Some of them are,

• Cost or fee of mutual funds. You can save some amount by opting for direct funds. Normally I have seen a difference upto 1% in charges for regular and direct fund.
• Less predictable income. Mutual funds income are not fixed. It can vary based on market condition.
• There is no chance to adjust. Mutual funds are managed by expert fund manager. You dont have much role in adjusting mutual fund portfolio. 

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Mutual fund playlist - Mutual funds Malayalam