The aim of this hub of mine is to allow readers to understand what exactly Mutual Funds are. If you are looking for Mutual Funds definition, mutual funds are portfolios of stocks, bonds, and other investment instruments. The value of each portfolio is the sum of the value of the investments (stocks, bonds) which they hold. You own a portion of the portfolio when you purchase a mutual fund of it. Mutual funds are also known as Unit Trusts, just that one term is used in some countries, while the other term is used for others.

So now that you know the mutual fund definition, perhaps I can tell you more about Mutual Funds and why you should invest in them!

I will be creating a series of hubs on Mutual Bonds. So far other then this hub which gives an overview of mutual fund definition, I have also created another hub on Bond Mutual Funds! Stay tuned for more Mutual Fund hubs!

After you know the mutual funds definition, perhaps I can give you SEVEN good reasons why YOU should invest in Mutual Funds!

One: Mutual Funds are well-diversified investment instruments, compared to stocks, shares, bonds etc. The risks involved in the investment are spread out because a single Mutual Fund will invest or buy into a big variety of stocks and bonds or other investment instruments.

Two: Mutual Funds are safer investment vehicles and are less volatile. There are a wide range of Mutual Funds to choose from, including the safest money market mutual funds to the most volatile such as single country stocks.If you are less averse to taking risk, you can choose a money market or fixed income unit trust that can give more stable returns. If you are investing for the long term, you can take up a mutual fund that is more volatile as in the long term, the mutual fund would more likely appreciate in value and perform better than safer investments. I will introduce the wide range of mutual funds in my subsequent hubpages.

Three: Mutual Funds can be bought using small amounts of money. A small sum of money can buy you a diversified portfolio with a mutual fund. Other investments like stocks and shares may be more costly. There are also regular savings plans available for you to buy mutual funds using a small amount of your salary every month. Make arrangements with your mutual fund provider to buy some mutual funds with a portion of your salary every month. This is also a good strategy known as dollar cost averaging, while the cost of the mutual funds is averaged out as you buy the mutual fund at its prevailing price during purchase, allowing the total cost to be averaged.

Four: By buying mutual funds, you can easily invest in the stocks and shares of companies all over the world! This make things easier and purchases can now be done easily online. As mentioned, there is a large variety of mutual funds to choose from, from different risk gradings to different sectors and different fund types. By buying mutual funds, you actually broaden your opportunities and selection variety.

Five: Buying mutual funds gives you a peace of mind and is less stressful. If you want to buy an investment that can let you sleep soundly at night, mutual funds can be one of your choices. Do you know that mutual funds are managed by professional Fund Managers? Many critics inform that you should know what you are doing with your own money and never pass it to strangers. Well, if you do not know how to invest, might as well pass the money to somebody who knows better, right? So it is up to you, whether you want to sleep well at night and not be worryied about the ups and downs of the stock market. Just put your money into the mutual fund and leave it there! Of course, I am not forcing you to, it is all a matter of personal choice.

Six: Mutual funds can allow you to reap great returns! Do I even need to tell you this? As mentioned already, over the long term mutual fund investments can reap great returns. Of course if you had made some investments before the current economic crisis, you may have made a paper loss. But this only means that mutual fiund prices are at a lower level right now and its still a good time to buy more of them. I have heard that some good unit trusts have returned more than 200% in a year. Unfortunately, I have not got such returns myself, though some funds that I invested near the bottom of the crash has already given me a 50% profit. Most higher risk mutual funds will give an average of about 15% - 20% annualized returns every year.

Seven: To end this off, what do you want when you sell your mutual funds? Money right? Am glad to say that the redemption of mutual funds is almost immediate. If you own stocks and shares, you might not be able to sell them off at the right price because there are not enough buyers in the market. But with mutual funds however, the issuer is bound by their agreement to buy it back from you at the day's prevailing price no matter how large the number of units you hold. So need some cash? Sell off those mutual funds now?

Having explained the goodness of mutual funds and the mutual funds definition, I hope I have given you a better idea of what mutual funds are as well as get you to take action and try out purchasing some mutual funds. I will be providing more information on mutual funds in time to come so do look out for them! See ya soon...