By 2011, there were just over 7500 mutual funds in the US alone with total assets of $11.8 trillion and the figure was about $25 trillion for the entire globe.[1]

So why are they are so popular? A mutual fund is a type of collective investment scheme. This makes sense because of the benefits of economies of scale in bringing about cost sharing with other investors and the risk reductions that results from the diversification that happens when investing in a group rather than alone. But of course, there are also drawbacks of these type of investment funds. The main one being that investors will find it tough to reduce the fees they pay due to the fact that the market for mutual funds is not competitive.

In the United States, the top five mutual fund houses are Vanguard, Fidelity, American Funds, BlackRock and PIMCO.[2] Professional investment management is a benefit of mutual funds which greatly improves the returns and also the risk management. I think one of the reasons why I would put money in a mutual fund is that it allows me to join in investments that would otherwise only be offered to larger investors. However, this comes at the cost of the chance to customize if it was just your own money.

These days mutual funds are the favored alternative when it comes to retirement plans. But, aggregate mutual fund assets went down because of the credit crisis in 2008.

If you are looking at emerging markets, I want to state here that mutual funds are actually an under tapped market in India for the reason that they are seen as risky and people there do not have much information about these investments. ING Vysya, ICICI Prudential, Franklin Templeton and Reliance are some of major mutual fund complexes in India.