A vehicle for investing in stocks and bonds
A mutual fund is not an alternative investment option to stocks and bonds, rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities.
Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses.
Mutual funds are investment vehicles, and you can use them to invest in asset classes such as equities or fixed income. moneycontrol recommends that you use the mutual fund investment route rather than invest yourself, unless you have the required temperament, aptitude and technical knowledge.
In this article we discuss why and how you should choose mutual funds. If you would like to familiarise yourself with the basic concepts and workings of a mutual fund, Understanding Mutual Funds would be a good place to start.
Using the checklist below should help you to extract the most from your mutual fund investment process. We assume that you will be investing largely through mutual funds to meet your targeted asset allocation plan.