Definitions of Mutual Funds
There may be considerable confusion about the exact definition of mutual funds, especially those who do not understand technical terms. However, there is no need to confuse. A simple definition of a mutual fund is as follows: It is a professionally managed collective investment program that brings together funds from various investors and invests in bonds, stocks or other assets. A combination of bonds, stocks and other assets is known as a portfolio.
Mutual funds may invest in a variety of securities: cash instruments, stocks or bonds. There are various subcategories. Equity funds may invest primarily in stocks of a particular industry, such as technology or utilities. These are called departmental funds. Professional managers always monitor the mutual fund portfolio, monitor and monitor the cash flow to and from the fund, and examine the future performance of the investment.
There are three ways to make money from a mutual fund:
You can earn a yield bond from a dividend on stock or interest. The Fund distributes most of its annual income to fund holders
If a fund sells a more valuable security, it will receive capital gains. Such profits are usually allocated to investors
If the fund holds the price increases, but the manager does not sell the fund's stock value increases.
Advantages of Mutual Funds:
* Professional Management: – If you do not have time Or expertise to put your stock, a mutual fund is a great way for professionals to deal with your money. Mutual Funds are the cheapest way for small investors to hire full-time managers to take care of your money and make investment decisions
* Diversification: – With mutual funds, you have the opportunity to expand on a large area and sector , Your money, it is impossible for a small investor to own. Therefore, the risk spread.
* Liquidity: With individual stocks, mutual fund shares can be converted to cash at any time.
* Economies of scale: – Transaction costs are much lower because mutual funds buy and sell large amounts of securities at one time
* Simple: – When you understand the definition of mutual debt, investing in mutual funds is easy. Banks usually have their own mutual funds, and the minimum investment required is minimal. Even if only $ 100 may be invested per month