The term mutual fund is quite self-explanatory in that it suggests a collection of funds from more than one individual, which is then invested in shares and bonds. Therefore, instead of unit investors, many investors mutually invest their wealth.

However, the very advantage of a mutual fund can be a bane. Collective investment in mutual funds means that the cost is shared among the investors proportionately. So is the profit, or loss. But in case of a market crash (like the mutual fund scandal of 2003) everyone who has invested in it will suffer great loss.


The average market speculation suggests that investing in mutual funds result in poor returns.


Also the recent hike in oil prices has put a prominent question mark on oil mutual funds. Analysts predicted soaring oil prices post the Iraqi invasion of Kuwait. The collective finds of Morningstar groups saw an 11% rise at the year end. Another company that gained up to 13% is The Fidelity Select Energy Services Fund.


Therefore, although the common man continues to complain about the rising oil prices, investing in oil mutual funds is a good option once you have surveyed the market carefully.


If you are going to buy an oil well (seeking revenue when prices rise further) it is advisable to do so mutually due to the high-capital investment required for such an asset. Oil mutual funds in Big Oil is a good idea as well since it ties together seven of the largest oil companies. It also takes better care of the risk factors due to being such a large concern.


When participating in oil mutual funds realize one thing: the market fluctuation of such an investment has little to do with the business itself. Oil is a commodity that will have a high and steady demand in the world market till alternative energy resources become main stream. A mutual fund that holds oil stocks and has a good overall performance record is a good investment opportunity.


The rising market price of oil has generated more investment in oil mutual funds as a whole. The United States Oil Fund (USO) was considered a high-risk investment until a 30% rise in oil price in the previous year.


Every investment bears its own set of risks. The same goes for a mutual fund.


Due to excess demand for cash in the economy, if bonds are sold off quickly, then bond prices will fall due to its excess supply in the market. This will reduce the level of investment in the economy, which will lead to risk of bankruptcy. This ultimately results in a credit-risk situation (where the bond-issuer is unable to repay the investors). Mutual fund investments in foreign securities bear the risk of a currency rate fall. Since all mutual funds have a fund manager, profitability from the investment is dependent on his ability to analyze the market correctly and carry out the functions accordingly.


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