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 called 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 oversee 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 distributed to investors

If the fund holds up the price, the manager does not sell the fund to increase the value of the stock.

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 is a small investor employed by a full-time manager to take care of your money and make the cheapest way to make investment decisions

* Diversification: – With mutual funds, you have the opportunity to expand in 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 into cash at any 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