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Is it wise to invest in different mutual fund companies or just one?
Is it wise to invest in different mutual fund companies or just one company for maximum returns? My reason is that in case Company A fails, I still have a backup with other companies.

                 What is your opinion on this, will it matter if I invest in different companies? What are the chances that a mutual fund company will actually fail/close?

Best Answer - Chosen by Voters
Mutual Fund companies tend to not fold, but I can understand your concern. But generally when people invest in funds they look at different types of funds - like large cap domestic, international, small cap domestic, emerging markets, etc. It certainly can't hurt you to go with different fund companies.

I suggest you take a look at index funds - Vanguard and Fidelity have some good ones. They invest in a variety of markets and beat mutual funds over time. They also have low expense ratios. So if you want to look at seperate fund companies take a look at some of Vanguard's index funds
ANSWER2

Mutual funds are diversified to an extent. It is always good to diversify even if it's between different fund managers. Also it's good to get different investments working for you why not have some CDs and bonds as well. It never hurts to have a small amount of income investing to go with your growth investing

ANSWER3

Its a better idea to invest in more than 1 mutual fund. Yes MF is about diversification but you also need to diversify across mutual funds and across types of funds as well.

You may want to look at different sectors based on their performance; you may want to look at short term/long term funds, etc.

Dont diversify too much or management and tracking will become too much to handle

ANSWER4

The big companies are fairly secure, so failure is probably not the issue.

One thing to consider is how much money youare investing. If you have it between two companies, both will charge a maintenance fee, and you won't qualify for "break-points", which is the level where you get reduced commissions. Also, within a fund family, you can generally exchange from one fund to another without commissions. Just a few thoughts.

CHARACTERISTICS OF MUTUAL FUNDS

1: Investors purchase mutual fund shares from the fund itself( or through a broker for the fund) instead of from other investors on a secondary market, such as the New York Stock Exchange.

2: The price of investor’s pay of mutual fund shares is the fund’s per share ANV plus any share holder fees that the fund imposes at the time of purchase.

3: Mutual fund shares are “redeemable”, meaning investors can sell their shares back to the fund

4: Mutual funds generally create and sell new shares to accommodate new investors. In other words, they sell their shares on a continuous basis, although some funds stop selling when , for example they become too large

5: The investment portfolios of mutual funds typically are managed by separate entities known as “investment advisers” that are registered with the SEC

Mutual Fund-Keys to remember

1: mutual funds are not guaranteed or insured by the FDIC or any other Govt: agency.-even if you buy through a bank and fund carries the banks name. You can lose money invest in mutual fund

2: Fast performance is not a reliable indicator of future performance so don’t be dazzled by last years high returns. But fast performance can help you assess a fund volatility overtime.

3: All mutual have costs that lower your investment returns. Shop around, and use the SEC’s Mutual Fund Cost Calculator at www.sec.gov/investor/tools.shtml to compare many of the costs of owning different funds before you buy.

How does SIP works?

You can enroll for an SIP directly without having to make a one-time investment. Suppose you enroll for a SIP of RS per month for one year in January 2008. Your first investment will be for Rs500 and units will be allotted. As it takes time for an SIP document to be processed with banks, your SIP installments may start latest by March. A few fund house also allow SIPs in their new fund offer (NFO) period. This way, if you like a particular NFO, you do not have to wait for a-month-and-a-half to start an SIP.

You can use a SIP in two ways:
1: By issuing the required number of post-dated cheques, or

2: By authorizing your banker to debit your account on a specific date of a month for the SIP period chosen by you, also known as auto debit facility. This is a more convenient way to invest in a SIP.

Assume you invest Rs1000 every month and your SIP date is the first of every month. On this date, every month, the appropriate number of unit will be credited to your MF account. As your monthly contribution remain the same, if the market and, therefore, your fund’s net asset value NAV) goes up , you will get fewer units; if your fund’s drops you will get more units.

Computing your returns:Ultimately, you need to know the returns you have through your investments. Its easy to calculate returns if it’s a one-time investment because you simply calculate the percentage between the two values.(cost price and selling price) and then annualize it if the time period is more than a year. But how do you do it in a SIP, where there are multiple values, one for each month? Using the XIRR function in Microsoft Excel, You can calculate returns with irregular payments. The IRR’ of X1RR stands for internal rate of return and denotes the interest rate accrude on a investment where there is a series of payment.(SIP installment) and an income (redemption) at the end.

What is SIP?

An SIP is a facility offered by all mutual funds for investing in equity funds. It requires you to invest a fixed sum of money periodically,say monthly,or quarterly,in an equity fund of your choice.The amount can be low as Rs 500 or Rs 1000. Your SIP should last for a minimum of six months.So even if you do not have a lumpsom to commit at the start, you can make a small beginning using an SIP,and then continue to invest periodically.The approach here is similar to investing regularly,every month,in recurring deposits of banks and post offices.However, a SIP gives you the long-term benefit of equity investing.

How to buy and sell SHARES?

You can purchase shares in some mutual fund by contacting the fund directly. Other mutual fund shares are sold mainly through brokers,banks,financilal planners,or insurance agents. All mutual funds will redeem(or buy-back) your shares on any business day and must send you the payment within 7 days.

The easiest way to determine the value of your shares is to call the fund's toll-free number or visit the website. The financial pages of major news papers sometimes print the NAVs for various mutual funds. When you buy shares , you pay the current NAV per share plus any fee the fund assesses  at the time of purchase,such as a purchase sales load or other type of purchase fee. When you sell your shares, the fund will pay you the NAV minus any fee the fund assesses at the time of redemption,such as a deferred(or back-end) sales load or redemption fee.A fund's NAV goes up or down daily as its holdings change in value 

WHAT IS MUTUAL FUND?

A MUTUAL FUND IS A COMPANY THAT POOLS MONEY FROM MANY INVESTORS AND INVESTS THE MONEY IN STOCKS,BONDS,SHORT-TERM MONEY-MARKET INSTRUMENTS, OTHER SECURITIES OR ASSETS, OR SOME COMBINATION OF THESE INVESTMENTS. THE COMBINED HOLDINGS THE MUTUAL FUND OWNS ARE KNOWN AS ITS PORTFOLIO. EACH SHARE REPRESENTS AN INVESTOR'S PROPORTIONATE OWNERSHIP OF THE FUND'S HOLDINGS AND THE INCOME THOSE HOLDINGS GENERATE.