Mutual funds are the most suitable investment option for retail investors who do not have a large investable amount and thorough know-how of the financial markets.

Silly, a retired person, invests all his moneys in 6-month bank deposits. During the last few years, each time a deposit matured, he reinvested the proceeds at lower interest rates. With declining interest income, he is eating into his corpus to meet regular living expenses.

Billy, a colleague of Silly, invested his retirement proceeds in mutual fund schemes, which in turn invested in interest bearing debt securities. His portfolio has returned over 20% p.a., during the last three years. This was possible because of the decline in interest ratesthe same factor that upset Silly's plans for a peaceful retirement.

The examples of Silly and Billy show that it is no longer a question of whether people can afford to invest in mutual fund schemes. The moot question is whether they can afford not to invest in mutual funds.

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