by Christina Pomoni

Created on: September 20, 2009

Staring down 2010, the economy seems to be in turmoil with uncertainty prevailing in the stock market and returns on investments being riskier than ever. Investors are considering alternative investments such as mutual funds to keep their portfolio of individual stocks rather balanced. However, as the mechanisms of the capital markets have undergone through major changes due to the large quantity of money infused to the mutual fund investments, investors should consider a lot of factors when planning such investments.

Generally, mutual funds aim at achieving the highest possible capital gains for the shareholder by taking advantage of investment opportunities in global capital markets. To achieve that, fund managers invest primarily in large-cap funds, oriented in countries with a prospect of sustainable economic development. One of the major advantages of mutual funds is that they are multiple investments that trade off losses in the same portfolio. This means that if one stock is underperforming, the other stocks in the portfolio can make up for it. In this way, the risk is decreased and there is a better chance for higher returns on investment.

Equity Mutual Funds (EMT) invest pooled amounts of money in stocks of publicly listed companies. Based on the market capitalization of the stocks, equity mutual funds are classified into large-cap, mid-cap and small-cap funds, and in effect, they represent ownership (equity) of the stockholders in the company in the aim to see the market value of the company increase over time.

In 2010, global capital markets are likely to look very diverse than the previous years, for the most part because private equity and hedge funds entice a growing number of investors. As equity fund managers employ a variety of stock picking techniques when making investment decisions for the portfolios of their clients, they have to face major market drivers and operational challenges deriving from the approaching retirement of the baby-boom generation. Managed consumption substitutes for long-term accumulation of capital and in this context, fund managers face the altering dynamics of capital markets.

Pros of investing in EMT in 2010

The impressive growth of the mutual funds sector is mostly explained by the massive investing in securities with large capitalization. Large cap securities can absorb the money flow and have a greater liquidity when investors want to trade off a certain position. Aging populations are one of the key drivers of

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