What is a mutual fund?
A mutual fund is an investment that pools money from many individuals and invests it according to stated objectives. Professional managers make investment decisions on behalf of fund investors, buying and selling investments such as money market investments, bonds, and stocks. When you purchase units of a mutual fund, you become a part owner of all the investments held by that fund.
– A mutual fund is an investment fund divided into units (equivalent to shares) which can be bought from and sold back to the manager of the fund, but which are not traded as such. The value of the fund NAV (net asset value) per unit is calculated frequently. Many countries have favourable tax regimes for mutual funds, to encourage saving.
Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unitholders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
A mutual fund is a portfolio of stocks, bonds, or other securities that is collectively owned by hundreds or thousands of investors and managed by a professional investment company. The shareholders are people who have similar investment goals. Each fund has specific investment criteria, which are spelled out in its prospectus, the official booklet that describes the mutual fund. Investors then know what they are getting and can match their objective to that of a fund. The pooled money has more buying power than one investor alone, so that a fund can own hundreds of different securities. Thus, its success is not dependent on how just one or two companies perform. A mutual fund makes money in several ways: by earning dividends or interest on the investments it owns and by selling securities that have appreciated in value. You, in turn, make money in the form of dividends and interest that are passed on to you and the increase (or decrease) in the fund’s value. The mutual fund manager ke
Related Questions
- What other funds in the current plan lineup are closed to new investors? Will any of the closed funds be available to participants who invest in the new self-directed mutual fund window?
- Do students need to write a separate introduction and conclusion for Academic Writing Task 1?
- What is a mutual fund?
