Sushant H.

Gawali
M-3010

Advantages of Mutual Funds:

• Portfolio diversification: It enables anyone to
hold a diversified investment portfolio even with a
small amount of investment like Rs. 2000/-.
• Professional management: The investment
management skills, along with the needed
research into available investment options, ensure
a much better return as compared to what an
investor can manage on his own.
• Reduction/Diversification of Risks: The
potential losses are also shared with other
investors.
• Reduction of transaction costs: The investor
has the benefit of economies of scale; the funds
pay lesser costs because of larger volumes and it
is passed on to the investors.
• Wide Choice to suit risk-return profile:
Investors can chose the fund based on their risk
tolerance and expected returns.
• Liquidity: Investors may be unable to sell shares
directly, easily and quickly. When they invest in
mutual funds, they can cash their investment any
time by selling the units to the fund if it is open-
ended and get the intrinsic value. Investors can
sell the units in the market if it is closed-ended
fund.
• Convenience and Flexibility: Investors can
easily transfer their holdings from one scheme to
other, get updated market information and so on.
Funds also offer additional benefits like regular
investment and regular withdrawal options.
• Transparency: Fund gives regular information to
its investors on the value of the investments in
addition to disclosure of portfolio held by their
scheme, the proportion invested in each class of
assets and the fund manager's investment
strategy and outlook

Disadvantages of Mutual
Funds
• No control over costs: The investor pays
investment management fees as long as he
 remains with the fund, even while the value of his
investments are declining. He also pays for funds
distribution charges which he would not incur in
direct investments.
• No tailor-made portfolios: The very high net-
worth individuals or large corporate investors may
find this to be a constraint as they will not be able
to build their own portfolio of shares, bonds and
other securities.
• Managing a portfolio of funds: Availability of a
large number of funds can actually mean too much
choice for the investor. So, he may again need
advice on how to select a fund to achieve his
objectives.
• Delay in redemption: It takes 3-6 days for
redemption of the units and the money to flow
back into the investor’s account.
10 REASONS TO BUY A MUTUAL FUND?

1. Mutual Funds Offer Diversification

The beauty of a mutual fund is that you can buy a mutual
fund and obtain instant access to a hundreds of individual
stocks or bonds. Otherwise, in order to diversify your
portfolio, you might have to buy individual securities, which
exposes you to more potential volatility.
2. Mutual Funds are Professionally Managed
Many investors don’t have the resources or the time to buy
individual stocks. Investing in individual securities, such as
stocks, not only takes resources, but a considerable amount
of time. By contrast, mutual fund managers and analysts
dedicating their professional lives to researching and
analyzing current and potential holdings for their mutual
fund.
3. Mutual Funds Come in Many Varieties
A mutual fund comes in many types and styles. There are
stock funds, bond funds, sector funds, target-date mutual
funds, money market mutual funds and balanced funds.
4. Mutual Funds Have Low Minimums
Many mutual fund companies allow investors to get started
in a mutual fund with as little as Rs. 2000/-
5. Systematic Investing and Withdrawals with Mutual
Funds
It is simple to invest regularly in a mutual fund. Money can
be pulled directly from a bank account and invested directly
in the mutual fund. On the other hand, money can be
regularly withdrawn from a mutual fund and be deposited
into a bank account. There are generally no fees for this
service.
6. Mutual Funds Offer Automatic Reinvestment
An investor can easily and automatically have capital gains
and dividends reinvested into their mutual fund without
a sales load or extra fees.
7. Mutual Funds Offer Transparency
Mutual fund holdings are publicly available (with some
delays in reporting), which ensures that investors are
getting what they pay for.
 8. Mutual Funds Are Liquid
If you want to sell your mutual fund, the proceeds from the
sale are available the day after you sell the mutual fund.
9. Mutual Funds Have Audited Track Records
A mutual fund company must maintain performance track
records for each mutual fund and have them audited for
accuracy, which ensures that investors can trust the mutual
fund’s stated returns.
10. Safety of Investing in Mutual Funds
If a mutual fund company goes out of business, mutual fund
shareholders receive an amount of cash that equals their
portion of ownership in the mutual fund