What is a mutual fund ?

A  mutual fund  is  an  investment  tools  that  allows  small  investors   to  pool   their  money  in  a  well managed  basket  of  securities  and   hire  a  portfolio   manager. The  money  thus  collected   is   then  invested   in  different   financial   instruments   such   as   shares , debentures  , equity ,  bonds  and commercial  paper    .                                        

All mutual funds are registered with SEBI .The performance of a scheme is reflected by  'NAV' which is disclosed daily in case of  open - ended  and  weekly  in  case  of  close - ended  scheme .  Investors  can  access  'NAVs'  of  all  mutual  fund  at   one  place in 'AMFI' . Mutual  funds  give  returns  in  two  ways -capital  appreciation  and dividend  distribution . All  mutual  funds  are  required  to  disclose  full  portfolios  of their schemes half - yearly in newspapers .

Top 10 tips to consider ,  when buying a mutual fund :

1 The  key point is  to invest on a regular basis  mutual fund  and  reduce  the  risk of investing  a  large amount  of  money  at  a  time . You  will  get  a good return after a specified time period . 
2 It  is  a  universal  fact  that  stocks  perform better than  any other liquid investment. So , try to invest in that mutual fund which diversify its fund in stock market .
3 Market timing  plays  a  vital role in the investment  process .So , Always enter  the  market as soon as possible .
4 Short-term  trading  will  not  make  you  happy  in  mutual   fund . Brokers  as  well  as  income  tax department will get advantage of it .So,Always become a long-term investor.The key point of success in mutual fund is "money saved is  money earned " . So , leave your money in a mutual fund and let it to rise for some years .
5 Do a lot of research  and  buy  those  mutual  fund that are investing in the topmost companies .
6 Always determine the expense ratio which shows you how much the fund  manager charge for their services . It should be under 1 percent .
7 Before   investing  in  a  mutual  fund , you   need  to  analyze  your  financial  goals. Each  individual   has  different   financial   goals  based  on  age , lifestyle , financial independence, family commitments ,level of income and so on .
8 Don't  make  investment decision  on  the basis of past performance of a scheme. Past performance of a scheme either  either good  or  bad  will  not decide its future  performance .
9 An important point of decision  is  the type of investor . One wants to find a fund to buy and hold or one to change fund holdings at a regular interval of time .
10 Equity  funds  are  risky  but  offers  maximum   returns . liquid  funds are ideal for institution ,corporates,  businessman for very short interval of time .Tax saving funds are  availing  tax  benefits . Debt   funds  are  ideal  for  those  prefering  safety  and regular income .  

Difference between share market and mutual fund :

1 The risk of loss is  higher in  case of share market but  it is lower in case of mutual fund ,with the same amount of money  .
2 An investor of  share market must have good  knowledge and experience  before investing  money   into  it  . But , an  investor  of   mutual   fund  do  not   require  any experience . A fund manager is doing all the work after investment .
3 Share is a direct investment in a capital market .On  the  other  hand , Mutual  fund  is  an  indirect  investment to enter into capital market .

4 A share market is like an organization  that  enables  individual  to  trade in capital market . On the other hand , a mutual fund  is an institution that trades on behalf of a few investors  on the share market.
5 In  share  market , you  can only  make money when  the share price  is increasing. But,this is not in case with mutual fund .
6 Dividend is distributed for share ,  But,this is not in case with mutual fund .
7 An investor  has no other  option  to  invest in  any  other securities  if  they  already  invest in share market . But , mutual fund  give  an option  to  the  investor to invest in diversified  securities at the same time .