What is Mutual Fund?
Mutual Fund is a body corporate that pools the money from individual/corporate investors and invests the same on behalf of the investors /unit holders, in various investment avenues like equity shares, Government securities, Bonds, Call money markets etc., as per the pre-specified objective and distributes the profits earned from such investment. In India, Mutual Funds are registered with the Securities and Exchange Board of India (SEBI).
• A mutual fund is nothing more than a collection of stocks and/or bonds. You can make money from a mutual fund in three ways: • Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. • If the funds sale securities that have increased in price, the fund has a capital Gain. Most funds also pass on these gains to investors. • If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sale your mutual fund shares for a profit.
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 depending upon the fund’s stated objective. The income earned through these investments and the capital appreciations realized are shared by its unit holders, in proportion to the number of units owned by them. Thus, a Mutual Fund offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
A mutual fund is nothing more than a collection of stocks and/or bonds. You can make money from a mutual fund in three ways: • Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. • If the fund sells securities that have increased in price, the fund has a capital Gain. Most funds also pass on these gains to investors in a distribution. • If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sell your mutual fund shares for a profit.
Understanding what it is and how it works should be the first thing you do before betting any money into it. A mutual fund is a pool of investors’ money into multiple types of investments, known as the portfolio. Stocks, bonds, and money market are examples of the types of investments that make up a mutual fund. Mutual funds are managed by professional fund managers who will choose securities and decide either to buy or sell the stocks for the most effective growth. This what is mutual fund all about, the easiest entry to the stock market. As a mutual fund investor, you can either earn dividends or NAV appreciation when there are profits; but if there are losses, your NAV will decrease in value. Mutual funds are, by nature, diversified. These mean they are made up a lot of different investments. That tends to lower your risk (avoiding the old “all of your eggs in one basket” problem) from any particular stocks or types of investment. And, because someone else is managing them, you don’
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?
- What if my clients want to sell a portion of their pledged Franklin Templeton mutual fund shares?
- What is the difference between a mutual fund and a stock?
