Mutual Funds                                                      As the name suggests Mutual Fund is a fund collected by pooling money by a group of people termed as investors. The fund is collected with a predetermined objective of investment. All Mutual Funds have a Fund Manager who is responsible for investing the pooled money into specific areas, like equity or bonds. When an investor puts money in a mutual fund, he buys units of that MF and thus becomes the shareholder or unit holder of the said MF. Mutual fund is one of the best available investment options as compared to other methods, as they are cost efficient and easy to invest. By investing in MF, individual gets the benefit of stock markets without actually worrying about the day to day movement of the stocks and the market.
Stocks & Bonds When one buys stocks of a public company he gets the shares equivalent to his investment and  he becomes the share holder / partner in that company.
Bonds are basically the means of lending money to Government or a company, and in return one receives interest on the invested money. Bonds are issued for a pre determined period of time and are most common lending investment used in the market.
Regulatory Authority To protect the interest of the investors, Government has formulated SEBI which formulates and regulates the policies related to functioning of Mutual Funds. MF's either promoted by public or private entities including the ones promoted by Foreign entities are governed by SEBI regulations.
	Types of Schemes
	1. Open – Ended :
	An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. One can conveniently buy and sell units at Net Asset Value ("NAV") related prices.
	2. Close - Ended :
	Closed ended funds have  a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. There are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation.  Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.

Types of investment by MF’s :

1. Equity fund:

In this category the corpus is invested mainly in stocks/equities. The investment break up may vary depending upon the specific  scheme and the outlook of the fund manager. Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix.

2. Debt funds:

In this category the corpus is invested mainly in bonds of Government, private companies, banks and financial institutions. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors.

3. Balanced funds

As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities.  These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

Advantages of Investing Mutual Funds:

1. Professional Management – The biggest advantage according to me is that this gives the small investor the option to invest his money professionally. The fund managers are qualified who invest wisely with a specific focus. Individuals who are mostly small investors do not have the time or the expertise to track the market and handle the volatility. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.

2. Diversification – The investors money is invested in a diverse range of stocks and bonds. This covers the risk which arises out of investment in a single sector The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.

3. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds do not perform too well, as their management is not dynamic enough to explore the available opportunity in the market. So many  investors debate over whether so-called professionals are any better than investor himself managing his portfolio.

2. Costs – At times there are heavy deductions for entry and exit loads. The mutual fund industries are thus charging extra cost under layers of jargon. However SEBI is now working on means to reduce these extra charges and to make them consistent across the sector.

3. Dilution – As the funds have small holdings across different companies and sectors, high returns from a few investments often don't make much difference on the overall return. Also when money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

4. Taxes – The return on Mutual Fund investment is taxable and often the actual return is much less than projected by MF managers due to TDS.