MFs are said to be best for creating wealth over long-term. There are several types and the risk varies with the kind of asset classes. This topic has been discussed in an article in Times of India dt. Nov 01, 2011.MF is created with a large number of investors investing their money. The name of the fund indicates some idea of the asset class, the fund will invest in. Compulsory registration of all MFs with SEBI becomes the first wall of defence for investors. SEBI also keeps a watch on MF activities from the point of view of investors. A group of qualified and experienced persons form an asset management company and manage the fund. Their actions are guided by the trustees. Both have the responsibility of managing the money of others. When an investor desiring to purchase MF, approaches with the necessary requirements, the funds allot units to the investor at a price based on NAV, which is computed and published daily. But at the launching time units are sold @ Rs. 10 each. There are three types of MF schemes. First is open-ended scheme, wherein we can buy or sell as per our wish, based on NAV price, though there may be restrictions some times. In a close-ended scheme, units are issued to the investors only at offer time (NFO). Later we can sell or buy units daily through the exchange, for limited number of years, after which investors get the money back or scheme is made open ended. Exchange-traded-funds (ETFs) are mix of above two schemes. ETFs are listed and traded daily with price close to NAV. MFs are advantageous especially due to better returns for ten years or more, diversification, good management services, liquidity, strong Government backed regulatory help, professional service mostly at a low cost and exposure to blue chip stocks, if the fund has them in its portfolio. The cost of such service gets distributed on all investors. We can buy and sell MF units on all working days and can get redemption amount in one or two days. Also cost of buying and selling and getting information is very low. Through MF schemes there is indirect participation of even small investors in options available to large investors. Among the disadvantages are no flexibility to sell or buy stocks of choice and inability to predict returns in advance.