In simple terms, Mutual funds are a mechanism wherein you let professionals manage your money for you. Large number of investors pool in small amounts of money and let a fund manager manage it for them for a small fee.
Mutual funds are an ideal platform of investment for small investors. One can invest small amounts. There is no minimum time for which money needs to be blocked. You can invest today and redeem tomorrow (but watch out for exit loads). Professionals manage the money for us and likely to make better investment decisions than us. We pay a very small amount of the amount invested as Asset management fees.
However, one must be careful in the choice of mutual funds. For example, investors often fall into the trap of investing in “regular” mutual funds and earn much less. Investment in Direct Mutual funds helps you earn up to 40% more than when you invest in Regular funds.
REad More: http://www.jama.co.in/mutual-fund-direct-plans-online-invest/
Also remember that mutual funds are only a means to invest in various asset classes. Mutual funds reduce the risk to some extent on account of diversification, but do not completely eliminate them.
