A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
What is the role of an investment advisor
Usually, when people select a scheme themselves, they do so based on its performance. They do not believe that past performance can be unsustained. Pattern valuation is a function of various schema attributes, e.g. the objective of the scheme, the investment universe, the risks the fund is taking, etc. This requires the investor to put in time and effort. The investor must also have the necessary skills to be able to understand the characteristics and nuances, as well as the ability to analyze and compare between many options. A mutual fund distributor or investment adviser would be qualified and trained for such a job.
Secondly, more important
than investing in the best scheme, it is important to invest in a scheme that is more appropriate or suitable for the investor’s current situation. Although the investor’s situation is better known to the investor, a good advisor or distributor would be able to ask the right questions and put things into perspective.
Once the portfolio is
built, regular monitoring of the characteristics of the scheme and the portfolio is necessary, which is on-going work. A consultant/distributor also helps you review these patterns.