What is a mutual fund?
The following are some of the more popular definitions of a Mutual Fund A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net Asset Value (NAV) is determined each day. Mutual Funds are financial intermediaries. They are companies set up to receive your money, and then having received it, make investments with the money Via an AMC. It is an ideal tool for people who want to invest but don’t want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not. A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own part of the overall fund. The beauty of mutual funds is that anyone with an investible surplus of a few hundred rupees can invest and reap returns as h
A mutual fund is an investment “vehicle” that generally holds a collection of stocks, bonds, or a combination of the two. They are designed to reduce risk by spreading investor dollars across a large collection of stocks and bonds to protect investors from significant loss should one security lose significant value. Mutual funds fall into two primary categories, actively and passively managed. Actively managed funds tend to carry higher fees than passively managed ones because they have staffs dedicated researching stocks. Passively managed funds attempt to track a certain index, such as the S&P 500 (an index that tracks 500 of the largest companies in the U.S. and is generally used for fund performance comparison), thus their research is minimal and their costs are lower.
Mutual funds are pools of money invested in many different securities and are managed according to set objectives. They are similar to the investments underlying variable annuities, but do not have the associated insurance fees of an annuity. With mutual funds, you can choose among aggressive funds for growth to more conservative funds for stability similar to that of a fixed annuity. When comparing similar investments, it is important to consider all factors of an investment, including performance, fees, risk, flexibility, time horizon and your own confidence in the investment or insurance company.
Mutual Fund is another saving or investment vehicle, but different from bank deposits, shares. 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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
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