Mutual Funds Investments: Selecting Criteria

- The essential purpose behind mutual funds is to secure two important benefits for small investors viz.(a) diversification of risk and (b) professional management of investments.- Mutual funds can spread their investments over dozens or even hundreds of companies but this is not possible for a small investor. Diversification reduces risk.- It may be noted that success in the investment game requires that:a) One must be prepared to spend the time required for selecting investments; andb) One should also have the necessary skills. A majority of ordinary investors can’t devote the time required and/or don’t have the skills.- Mutual funds resolve the problems mentioned above as they employ full-time professionally qualified managers who continuously follow companies and can be expected to select the investments more skillfully than ordinary investors.