A mutual fund is a type of professionally managed collective investment scheme that pools the money of many investors and invests it in stocks, bonds, short-term money market instruments and other titles. Mutual funds have a fund manager who invests the money on behalf of investors by buying/selling stocks, bonds, etc. Currently, the global value of all mutual funds amounts to more than $26 trillion. There are various investment avenues available to an investor such as real estate, bank deposits, postal deposits, stocks, bonds, debentures etc. A mutual fund is another type of investment avenue available to investors. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay There are many reasons why investors prefer mutual funds. Buying shares directly from the market is one way of investing. But this requires time to find out the performance of the company whose share you are buying, understand the future business prospects of the company, find out the track record of the promoters and dividend, bonus issue history of the company, etc. the investor must do research before investing. However, many investors find it complicated and time-consuming to analyze so much information and access so many details before investing in stocks. Investors therefore prefer the mutual funds route. They invest in a mutual fund which in turn takes the responsibility of investing in stocks and shares after due analysis and research. The investor does not have to worry about researching hundreds of stocks. Leave everything to the mutual fund and its professional fund management team. Another reason why investors prefer mutual funds is because mutual funds offer diversification. An investor's money is invested by the mutual fund in a variety of stocks, bonds and other securities thus diversifying the investors' portfolio across different companies and sectors. This diversification helps reduce overall portfolio risk. It is also less expensive to invest in a mutual fund as the minimum amount of investment in mutual fund units is quite low (Rs. 500 approx). With Rs. 500 an investor may be able to purchase only a few shares and not achieve the desired diversification. These are some of the reasons why mutual funds have gained popularity over the years. Indians are traditionally savers and invest money in traditional savings instruments such as bank deposits. In this context, if we look at around Rs. 7 lakh crore1 managed by Indian mutual funds, is no small achievement. A country that traditionally puts money into safe, risk-free investments such as bank FDs, post offices and life insurance, has started investing in stocks, bonds and shares, thanks to the mutual fund sector..