Mutual Funds
Truth about Mutual Funds – I: Fifteen reasons why mutual funds are good for you

This is the first of a two-part series on essential facts about mutual funds. The second part will discuss the common mistakes people make and end up losing money and faith in mutual funds

One of the giants of the investment industry, John Bogle, said “Your best hope of wealth creation is by developing a sound investment programme through mutual funds”.


Here are fifteen compelling reasons why mutual funds are good for you.

  1. The single most important function of mutual funds is to help you in earning a regular income or to generate capital gains over a period of time.
  2. Mutual funds do not offer an assured return. But, they have proven to be profitable long-term investments for individuals.
  3. Mutual funds have great potential. They generate higher returns than something guaranteed. They have created wealth for generally cautious investors who prefer safer investment options.
  4. Mutual funds have made investing very simple. You can do it with greatest of ease. And they are very economical and cost effective. But, remember, mutual funds are not perfect. They are almost perfect.
  5. Mutual funds are tightly regulated by the Securities and Exchange Board of India (SEBI). There can never be a case of any mutual fund vanishing with your money. You can be rest assured. It is just not possible.
  6. If you do not have time to research individual companies, then mutual funds are the best way to invest. A team of investment professionals does all the research and investing on your behalf. You just have to sit back, relax! And hold your mutual funds for long periods.
  7. Your money is pooled along with others, to take advantage of investments you normally do not have access to.
  8. Mutual funds are required to adhere to well defined risk management parameters and investment patterns. Your money gets invested with discipline and prudence.
  9. They have a nice way of lowering your risks. By spreading your money across various assets and strategies. Thus protecting you against putting too many eggs in the wrong basket. 
  10. Mutual funds promote good habits of savings and investing. They have protected countless investors against costly mistakes in the stock markets.
  11. Mutual funds help you in managing your future better. By helping you to achieve your financial goals. They help you in getting you where you want to be.
  12. You are free to sell your mutual funds anytime. You can sell them in parts or in small portions to suit your requirement. You get your money back in 3–4 day’s time with no questions asked.
  13. The temptation to engage in the ever so exciting, but self-destructive trading is more or less absent in mutual funds. Remember, in the short run hares may have more fun. But, in the long run it is always the tortoises that win the race.
  14. You don’t have to spend time in picking stocks. Neither are you required to monitor the stock ticker tapes or the stock markets very closely.  It frees up your time for you to do all those things you would like to do.
  15. Mutual funds generally provide terrific value to long-term investors. They are excellent vehicles for accumulating wealth for yourself and your family.

In the second part of this two-part series we will take a look at the essential facts about mutual funds.




4 years ago

Well i would say the above points are good if you r climbing the hill, as soon you reach higher risk will increase.

In short if market is good any stock will boom and as a result mutual fund too and if market crashes mutual fund too crashes Sometimes they even change their names, they sell their fund to some other fund houses.

So its matter of "right time of investment" and currently its right time.

Additionally i would like to point about tax saver mutual fund.They are like most favorite for fund-managers i believe they make their personal income out of it and defend it saying the tax gain is the benefit they have offered.

The author has not written anything magical.



In Reply to uttam 4 years ago

Mutual funds are mostly misunderstood. Thus the objective of this article is to inform readers about mutual funds.

To try and bring out those strong aspects of mutual funds which are normally ignored / overlooked.

Suiketu Shah

In Reply to uttam 4 years ago

Agree 100% Mr Uttam.Also sebi has mad rules for investors in mutual funds so anti-investor and so difficult to understand that people who donot know much about mf rightly prefer bamk fd's which even after tax give 10%/yr.Mutual funds normally give 13-14% per yr long term(if you have the right agent and have entered the right mutual fund when market is down).Is it worth taking risk for 3-4% more esp at a time where 9/10 mutual fund agents are crooks.the answer is a clear no.

R Balakrishnan

4 years ago

Enjoyed reading it. By keeping it so simple, the message gets through nicely.
Well written, Sir.



In Reply to R Balakrishnan 4 years ago

Feeling humbled Sir. Thank you so much for your kind words.

Bailouts for Crooks

With the WB government bailing out Saradha, we have set a dangerous precedent and reached a...

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Keep your Money Safe: Avoid money traps and MLM schemes

Chain-money schemes like Saradha are flourishing in our country. Countless crores have been lost in this manner. But these schemes aren’t the only danger. There are internet-based scams, phishing scams, identity theft, job scams, and much else you could be fooled by. Sucheta Dalal briefed participants on all this and more during an informative two-hour seminar

Even experienced investors often make amateurish mistakes, being lured by the prospect of big returns. Almost every other month we get to know of a big scam in one state or another, where thousands of crores have been collected from investors, who have been promised high returns, sometimes of more than 100%, in a relatively short period of time. Often, you’ll be surprised by the kind of people who have invested in these schemes. Sucheta Dalal, managing editor, Moneylife magazine, said, “In 2010, for example, a pyramid scheme called City Limousine found investors from even within the RBI and Income Tax office. According to numbers in a Times of India story, 15 RBI officials, 200 I-T officers and no less than 6,000 police officers invested in this dubious scheme. At one point, 10,000 investors were protesting outside the Azad Maidan police station in South Mumbai, but the policemen themselves had lost so much money in the scam.”


Just two weeks ago, another scam, run by West Bengal-based Saradha group, was exposed. The group had collected at least Rs17,000 crore from people in the state. Ms Dalal says that such scams could easily be stopped if the government wanted to, but they are kept alive by politicians themselves. She said, “In the Saradha chit fund scam itself you must have heard of many politicians who have been named. This is what happens when any case comes to light. You probably know that the promoters of Japan Life, which had collected Rs5,000 crore from investors were close to two prime ministers. It is also known that around Rs990 crore was transported out of the country by a single politician for the promoter of Speak Asia. But perhaps the best example is Sahara, whose promoter, Subrata Roy, is often seen hobnobbing with the biggest politicians. Plus, the group sponsors the Indian cricket team. When this company asks villagers in Uttar Pradesh to invest, why wouldn’t they believe everything that was told to them?”

Ms Dalal says that the political connections of these dubious companies allow them to flourish. She said, “A lot of promises are made immediately after the scam is exposed, but nothing happens. At a previous seminar we’ve had officers from the Serious Fraud Investigation Office tell us that they would like to take action but the government opposes this. The only way to ensure you are safe is by focusing on what is being sold to you. Keep in mind that if something is too good to be true, it probably is.”


There are a number of variants of pyramid schemes, but Ms Dalal said that, in her opinion, the binary scheme is the most dangerous. She said, “Any scheme that requires you to draw in a couple of other people is always a scam. It doesn’t matter if there’s a product involved. The only reason there is a product involved is so that it doesn’t become a money circulation scheme.”


Aside from pyramid schemes, though, there are internet-based scams, identity theft, phishing scams and job scams. Ms Dalal said that of all these scams, the phishing scams have become most sophisticated. She said, “You may receive a mail, ostensibly from your bank. It will ask you for your bank details or tell you your internet banking password is being misused. All these details will give them access to your bank account. Usually these e-mails ask you to click a link, redirecting you to another web-page. Now one thing to keep in mind is that banks never ask you to do this. If there’s a link it’s a scam. But when giving such details out, always verify the identity of the sender. Just two days ago I received one such mail from Axis Bank. You should always call the call centre to find out whether this is real or fake.”

From scams, Ms Dalal then moved on to relationship managers, who have become a real menace. She said, “Relationship managers are a recent phenomenon. We didn’t always have them. They were first welcomed because they gave individual attention. But the reason for this service is simple—they want you to invest in certain third-party products that earn them good commissions. The dangerous thing about a bank trying to sell you such products is that they know exactly when money enters your account and, therefore, when to strike.” Ms Dalal advised participants to not only note down the name of the relationship manager trying to sell them products, but the names and numbers of his boss and boss’s boss as well, because relationship managers change jobs regularly.

When it comes to choosing a bank, Ms Dalal said that government banks are the safest. Small cooperative banks are the ones that go bust most often and should be avoided. She said, “Public banks are sarkari and the government cannot afford the embarrassment of letting a public bank default of deposits. So your money is safe there. Even large private sector banks are safe because the government considers them too big to fail. Cooperative banks are dangerous because they are shakily run and politicised.


Lastly, Ms Dalal touched upon credit cards and the inherent risks of using them. She said, “Credit cards are necessary. They can be life savers in emergencies. But they can burst like bombs if you’re not careful. The interest rates are enormous, there are all sorts of charges and your bill could swell easily if you’re not careful.”




Madhur Kotharay

4 years ago

What is the story with Sahara? Are they doing similar stuff like the Saradha Group?

And if yes, why is the (floated by Sahara) ad on your website?

Vaibhav Dhoka

4 years ago

An eyeopener for common man but cheats are extraordinary smart as seen from City Limousin fraud where Over smart people were cheated.The reason GREED.

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