The article explores the performance of a few equity mutual funds in India and throws light on investing in the same.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus, a Mutual Fund is the most suitable investment for the retail investors as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. Equity Mutual Funds are one of the avenues if a person is looking for any real return on his/her investmentthat is, returns that are reasonably higher than the current rate of inflation.

It is well known that mutual fund managers use portfolio diversification as a strategy across various asset classes and within an asset class to enhance the performance of their schemes. The purpose of diversification is to cut down risk by marginally affecting returns. To understand the impact of the diversification strategy on the performance of mutual funds we undertook a detailed portfolio analysis of certain leading diversified equity growth funds from the period June 2005 to March 2006. The study excluded UTI, the largest mutual fund as full portfolio disclosure for its growth oriented equity schemes were not available at regular time intervals.

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