A mutual fund is a type of professionally managed collective investment that pools the money of many investors and invests it in stocks, bonds , short-term money market instruments and other securities. Mutual funds have a fund manager who invests the money on behalf of the investors by buying/selling stocks, bonds, etc. Currently, the global value of all mutual funds stands at over US$26 trillion. There are various investment avenues available to an investor such as real estate, bank deposits, postal deposits, stocks, debentures, bonds, etc. A mutual fund is another type of investment route available to investors. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay There are many reasons why investors prefer mutual funds. Buying stocks directly on the market is one way of investing. But this requires spending time in knowing the performance of the company whose shares are being purchased, understanding the future business prospects of the company, knowing the track record of promoters and dividends, bonus issue history of the company , etc. the investor must do research before investing. However, many investors find it tedious and time-consuming to review so much information and access so much detail before investing in stocks. Investors therefore favor the route of mutual funds. They invest in a mutual fund which, in turn, takes the responsibility of investing in stocks and shares after thorough analysis and research. The investor does not need to research hundreds of stocks. This leaves it to the mutual fund and its professional management team. Another reason why investors prefer mutual funds is that mutual funds provide diversification. An investor's money is invested by the mutual fund in a variety of stocks, bonds, and other securities, thereby diversifying the investor's portfolio across different companies and industries. This diversification helps reduce the overall risk of the portfolio. It is also cheaper to invest in a mutual fund since the minimum investment amount in mutual fund units is quite low (around Rs 500). With Rs. $500 onwards, an investor may be able to buy only a few stocks and not get the desired diversification. These are some of the reasons why mutual funds have gained popularity over the years. Indians are traditionally savers and invest money in traditional savings instruments such as bank deposits. In this context, if we look at around Rs. 7 lakh crores1 that Indian mutual funds manage, it is no small feat. A country that traditionally invests money in safe and risk-free investments like bank FDs, post office and life insurance, has started investing in stocks, bonds and shares – thanks to the mutual fund sector shift..