An investor can invest directly in individual securities or indirectly through financial intermediary. Globally, mutual funds have established themselves as the means of investment for the retail investor.

1. Professional Management: An average investor lacks the knowledge of capital market operations and does not have large resources to reap the benefits of investment. Hence, he requires the help of an expert. It, is not only expensive to ‘hire the services’ of an expert but it is more difficult to identify a real expert.

are managed by professional managers who have the requisite skills and experience to analyse the performance and and prospects of companies. They make possible an organised investment strategy, which is hardly possible for an individual investor.

2. Portfolio diversification: An investor undertakes risk if he invests all his funds in a single scrip. Mutual funds invest in a number of companies across various industries and sectors. This diversificationreduces the riskiness of the investments.

3. Reduction in transaction costs: Compared to direct investing through the funds is relatively less expensive as the benefit of economies of scale is passed on to the investors.

4. Liquidity: Often, investors cannot sell the securities held easily, while in the case of mutual funds, they can easily encash their investment by selling their units to the fund if it is an open-ended scheme or selling them on a stock exchange  if is close-ended scheme.

5. Convenience: Investing in mutual fund reduces paperwork, aves time and makes investment easy.

6. Flexibility: Mutual Funds offer a  family of schemes, and investors have the option of transferring their holdings from one scheme to the other.

7. Tax benefits: Mutual Fund investors now enjoy income-tax benefits. Dividends received from mutual funds’ debt schemes are tax exempt to the overall limit of  Rs 9,000 allowed under section 80L of the Income Tax Act.

8. Transparency: Mutual funds transparently declare their portfolio every month. Thus an investor knows where his/her money is being deployed and in case they are not happy with the portfolio they can withdraw at a short notice.

9. Stability to the stock market: Mutual funds have a large amount of funds which provide them economies of scale by which they can absorb any losses in the stock market and continue investing in the stock market. In addition, mutual funds increase liquidity in the money and capital market.

10. Equity Research: Mutual Funds can afford information and data required for investments as they have large amount of funds amount of funds and equity research teams available with them.