What is Mutual funds and what is minimum investment

Mutual funds collect money from the investing public and use buy other securities. These securities are usually stocks and bonds. The value of the mutual fund company depends on the performance of the securities it decides to buy.
Investing in a mutual fund will be safe than buying the shares of a company directly. For example, if you are purchasing the shares of a company, if the company is not performing well in that quarter, your money value will come down and you will lose the money. Instead of that if you invest in Mutual funds, the fund operator will buy many stocks from different companies. In such case even there is a decrease in share value for a company you will not stand to lose much.
Advantages of investing in Mutual Funds:
1. The risk will be less as they invest in different companies.
2. Mutual funds provide economies of scale
3. Mutual funds can be bought and sold easily, making them highly liquid investments.
4. These funds provide a low-cost way for individual investors to experience professional money management.
5. The potential for growth is high.
You can invest bigger amounts at a time or you can invest smaller amounts every month. You can stop investing any time as per your convenience.

Thank you DR N. V Shrinivasa Rao for guiding my very well. And also explaining me in detail.

Mutual fund is a category of investment which is offered by many Mutual Fund houses and it has become a preferred mode of investment for many individuals as well as organisation and business entities.

So mutual funds raise money and issue mutual fund units to their investors and from the corpus raised they invest intelligently in share market, debt market and other investment instruments. The return on their investment is then shared with their investors as per the holding of the investor.

Now the question comes that when Mutual Fund house is investing our money in share market then why we can not invest directly in the market and avoid the hassles of purchasing mutual fund units.

For getting the answer to this question let us understand the basics of share market.

In share market, there are many companies belonging to finance, manufacturing, pharma, household goods, construction etc and the share prices of these companies fluctuate in the market. For an average person it is very difficult to make out which company will go up and not in the market. So investment in share market is a risky proposition and it is not everyone's cup of tea.

On the other hand Mutual funds invest in different companies after doing proper financial research in the matter. So the risk of losing money is reduced considerably. This is the main advantage of the mutual funds.

There are different categories of these funds. Some of them are known as equity mutual fund and invest most of the money in equity market (share market) and give handsome return in an increasing market. Then there are balanced funds which invest in equity as well as debt instruments and give a moderate to high return and claim that they are less riskier than equity mutual funds.

The another category is debt mutual funds which only invest in debt instruments. They give marginal returns but are safer in comparison to the preceding two funds.

Mutual funds offer one time investment or monthly investment option (known as SIP) and depending upon one's investment strength one can choose it. SIP are supposed to be better as they go in an average path balancing the risk scenarios.

Generally the minimum amount of investment required in MF is only Rs 500.

One thing I want to add here is that mutual funds invest their corpus in the market and if anything adverse happens in the market like sliding of share prices, the net asset value (NAV) of the mutual funds will also decrease and eventually the value of units held by the investor will also decrease. So this is a downside which should be understood by the investor very clearly.

Generally these types of investments are done for a long time investment horizon and short time perturbation in the market should be ignored by a prudent investor.

Mutual - fund is the plateform where the fund - managers raise money from the investors so as to offer them a high - return within a specified period. However, the investor should exercise caution prior to investment since the mutual - fund selected by the investor may not yield promising result as per one's expectation and hence one must track the past performance and reliability of the said fund.
The minimum investment would be ? 500/- and this remains in the form of shares, each share being the value of ? 10/-. The fund managers do have sufficient experience in choosing the right funds where they invest money of the investors such as equity - fund, debt - fund, large cap funds etc.
Even we can choose such funds ourselves but there are chances that we may not take all the vital factors into account because of our ignorance of the latest developments in the market and the inherent functioning of the companies and we employ a safe strategy by choosing a well known mutual - fund.
NAV of the mutual fund known as Net - asset Value fluctuates time to time however we should not be perturbed by a slide for a short period, rather we should judge its performance for the long period - say a period of three years.
Hence selection of a mutual fund must be made with the consultation of a sound financial experts so as to get a hefty - return.

Mutual Funds are a way of investment by investors(mostly retail and small investors and beginners) in an indirect way o stock markets.

Not all know the intricacies or have the ability to take the risk associated with direct market investments. So they would like to invest through the help of some specialise experts and investment houses and spread their risks .
Mutual funds are thus investments in stock market instruments by a Fund house by gathering small amounts in terms of units and then pooling them and investing in stock markets in large amounts.

For this service the Fund House charge a certain service charges and also has some statutory charges involved inherent in it.

The investor is spread of the headaches of assessing the companies whose share the money gets invested as the same is done by the investment managers of the Fund. They periodically review and reshuffle the investments as per their assessment of the market conditions and also maximise their revenue.

The investor buys or sells the unis of Mutual Funds as per the NAV or net asset value declared by the fund very day.
The benefit is that an investor can invest with as small an amount as Rs500/-

There are various categories in Mutual Funds as per the investment pattern and sector in which the investment are made. An investor can choose the suitable fund for him . The brochures or details may give the relevant details of them.
As there are some intermediate agency involved, the MF s may not give same return as direct stock market investment. However many reputed and established MFs have rewarded their investors in a good way.

However, even with MFs investors may have to review their portfolio periodically to see how they are faring- by comparison and absolute fact figures.

You have asked many important questions at the same time, all of which require the detailed answer. But I am trying to provide information in brief.

1. What is a mutual fund?
Ans:- A mutual fund is a professionally-managed trust which pools the savings of many investors and invests them in securities like stocks, bonds, money market instruments and commodities like gold. Investors investing in a mutual fund have a common financial goal and their money is invested in different asset classes in accordance with that particular fund's investment objective.
2. How many types of mutual funds are there?
I would be extremely brief. Based on investment objectives, mutual funds can be of the following types:- equity funds, debt funds, liquid funds, hybrid funds (which invest in both equity and bond) and gold funds. There are various sub-categories within each category.
3. What are the benefits of investing in mutual funds>
There are many benefits to investing in mutual funds. The most important one is that the mutual funds are professionally managed. The liquidity of such funds is good. The investment can be in a lump sum or by SIP, i.e., it is flexible. In the long run, it gives better profit than most of the investment instruments. Some of the mutual funds give tax-benefits.

I have written more than ten articles in ISC alone on investing in mutual funds, some of which are mentioned below for your reference. You can go through these articles for a better understanding:-
(a) Top 7 reasons why you should invest in mutual funds
(b) Debt Funds: A better alternative to FD for conservative investors
(c) Top five tips to pick good mutual funds
(d) Different Types of Equity Mutual Funds
(e) Hybrid mutual funds - why to invest
(f) Debt Mutual Funds-Types and Investment Philosophies
(g) Know the basics of ELSS: The tax-saver and wealth-enhancer

You may search for these articles in the Articles section and read these articles for better understanding. Feel free to ask further questions.

In share market, when you want to buy share, that's one share per company released shares. In case of mutual fund, the fund manager creates a portfolio of shares and then makes you a small piece of those shares in a fund. So this way you are diversifying the shares in multiple companies with the help of the mutual fund.

Mutual funds are divided into multiple categories under the top categories of debt and equity. So keeping these two base aside, there are sub categories more than 10 for the types of fun that you can find.

Here are some of the requirements of the mutual fund purchase.

1. Need PAN and Aadhar.
2. Some fund house needs person to be 18 years old.
3. Register demat account if you want to process investment through them. Skip this step if you want to invest directly on the fund manager house.
4. Minimum 500 Rs for most of the funds and some funds require 1K or more.

This is enough to get you started in the mutual fund market.

In simple layman language, the Mutual fund is an investment program in which money are collected from all those people who want the better return but do not have much know where to invest in.

The fund manager of a particular mutual fund collects the money from people like us and invest in better return assets or schemes where money grows. The return is then distributed to the investor based on the units they hold at the time of distribution of return.

You can start investing in a mutual fund with the minimum of Rs. 500 and no limit on the maximum amount.