Q&A: What Are Mutual Funds and Can I Invest in them?A mutual fund is a portfolio of financial assets - stocks, bonds, treasury securities, etc - owned collectively by various individual investors, but managed on their behalf by an investment company. It amounts to a pooling of funds by several investors, under the management of an investment institution that has the skills, experience and tools to manage such funds by investing in financial assets. Usually, the institution creates the fund and invites the investing public to contribute by buying into it. They do this by buying units of the fund, meaning that the returns on the investment will be distributed in tune with contributions made by individual investors. Mutual funds provide another important platform for investing. Investors who choose not to bother with the challenges of stock evaluation and selection, for instance, can use this more stream-lined option: you simply invest in a mutual fund and leave the headaches of portfolio construction and management to the investment company. Indeed, given that a large number of the investors in economy may not be thoroughly equipped for the intricacies of the markets, it is a big surprise that mutual funds have not shone as a viable channel for investing. Markets like the USA have thousands of such funds and a huge participation by the investing community. Should you invest? If you are just starting out and don't feel comfortable selecting stocks, it is a good option. If you don't have the time to actively manage a portfolio, it saves the trouble. If you want to evaluate your performance over time, you could invest some in a fund and benchmark returns you personally generate with that from the fund to see if you are undermining your success by a do-it-yourself approach. Can there be problems? The managers of the fund could under-perform meaning loss of potential earnings. Complete failure is also not ruled out. What to do? Research the background of a fund before you invest. Check track record, including returns profile over the past few years and see how they compare with market averages and your expectation. Also probe into the mix of their investment portfolio to see that the risk/earnings outlook is in tune with your preference. If, for instance, a fund is too aggressive for your liking (investing in high-risk, possibly potentially high-yielding stocks or is not sufficiently diversified in your reckoning), you should check elsewhere. If you need advice, don't fail to talk to your financial adviser . 
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