Are mutual funds a good investment?

Mutual funds gained popularity with one very important thing - they allow investment between $25 and $100 000, which automatically include ordinary people.

Many of us want to take part in stock or bond operations, but often it require big enough capital, which we can rarely afford. The mutual funds are our choice to become part of this " game ", without investing, what we don't have.

So you want to invest in mutual fund and the most important question, which occupy you is - are mutual funds a good investment?

The answer of the question is easy but not simple - yes, in certain conditions mutual funds are good investment. It is not possible to give positive or negative answer of a question like that, there are too many variables in the mutual funds. In the ideal case, everything will work well and - yes, investing in mutual fund will be good investment; in worse scenario - you will loose your investment.

First you need to understand what is the mutual fund; it is a way to collect investments from companies and individuals, and to invest them in different instruments, trying to generate more capital for the investors. Every member of the fund receive shares, which determine how much he had invested and how big is his share in winnings or losses the fund has. In exchange of the share the fund takes the money and invest them - in equity, large-, mid- or small-cap companies, which are predicted to bring good or stable return.

If the money manager, who operates with the fund's investments is good - the fund becomes performer and brings high return.

If the opposite - the manager makes bad investments - the fund loses money, which shrinks its capital and make it low performer.

If you manage to find successful mutual fund, your investment will probably be good and profitable, but for that you must understand well what the funds are doing, how they work and how to find a good one.

To find successful mutual fund is very challenging task, if you don't pay to someone to do it, instead of you. There are thousands of mutual funds in India and around the world - according to some research the value of mutual funds' investments was over $3.3 trillions in the beginning of 2009 ($11 trillion in November 2009). A simple example of the size of mutual fund investments is that almost every second family in US is using it. So you will need more than just an idea, which to choose; to make sure that the mutual fund investment will be good - people search to find the top scorers and invest there.

In other words - investing in mutual funds can be good, only if you manage to control it well, choosing the best performers - funds and managers. There is always a risk, but choosing the investment you want, says that you know the risks and you are agree to take them.