Investments in Mutual Fund
Mutual Funds are a popular investment tool for investors because it offers a convenient and cost-effective way to invest in the financial markets. Mutual fund industry in India came with the concept of Mutual Fund in the year 1963 at the initiative of the Government of India and Reserve Bank of India. The growth was slow initially but it accelerated from the year 1987 when non-UTI players entered the industry. The industry witnessed a compounded annual growth rate of 31.25% from March 2003 to March 2011. The figure for March 2011 is the quarterly average for the first calendar quarter as the regulator stopped providing monthly average asset under management (AAUM) from September 2010 onwards.

Mutual Funds are right way to invest into because it provides affordability, liquidity, tax benefits, and professional management and most importantly it helps in maximizing returns by effectively utilizing hard earned money. It also allows investor to systematically invest in equities and debt markets through Systematic Investment Plan. Through this mode investor can take exposure with as little as Rs. Five hundred and by investing regularly for a longer period can benefit from cost averaging and can built a large corpus to meet future commitments.

Mutual fund is required to be registered with Securities and Exchange Board of India (SEBI), which regulates securities markets, before it can collect funds from the public. It acts like a company that pools money from investors and invests the same in stocks, bonds, short-term money-market instruments, other securities or assets and some combination of these investments. It offers an opportunity to invest in a diversified, professionally managed basket of securities. These securities are often referred to as holdings and all of the fund's holdings make up the portfolio. When one invest in a mutual fund, the investor is actually buying shares in the fund, which means investors own a percentage of the fund's entire portfolio in ratio of its holding. The assets in a mutual fund's portfolio are managed by a professional Fund Manager(s) who decides which securities to buy and sell based on the fund's investment objective, mentioned in the fund's prospectus.

Wide varieties 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.

If any new investor is looking to invest for the future in equities will usually face two options - mutual funds or individual stocks. However understanding the differences between them is essential as both carry inherent advantages and risks. Any individual investing in common stock of a company has to bear the responsibility of managing his portfolio on his own and also bear the price risk. In this active form of investment an individual must have sound knowledge, experience and adequate time, lack of which may increase his risk exposure. However Mutual Funds help to reduce risk through diversification and professional management. The experience and expertise of Fund managers in selecting securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns.

• Performance analysis of the scheme for a considerable long period taking into account historical returns and portfolio.
• Analysis of the Fund House and the experience of the Fund Manger.
• Analysis of the fund corpus and how it has changed across the time period.
• Comparison of charges deducted by Asset Management Companies across the category where an investor wishes to make investment.
• The price at which one can exit (i.e. exit load) the scheme and its impact on overall return.
• Comparison of scheme with its benchmark and how has the scheme performed especially in a volatile environment.
• Last but not the least an investor can refer to certain investment ratios such as Sharpe, Sortino, Treynor, Alpha etc. to judge the risk-return analysis of the scheme. The information regarding the ratio and their interpretation can be taken from www.mutualfundsindia.com.