Nowadays you must have heard many people around you talking about mutual funds and how it is a good investment option. Too much or too little information can get confusing at times. Hence, here’s a simplified version for your understanding. As the name suggests it is a mutual effort. A Mutual Fund is created when a lot of people (or investors) pool their money together. The management of this fund is under the direction of a qualified fund manager.
What is a Mutual Fund?
It is a trust that amasses funds from various contributors who share the same monetary objectives. The money is then invested in securities, including stocks, bonds, money market instruments, and/or other types of investments. Units, a portion of the holdings of the fund, are owned by each investor. The income or gains from this pooled investment are allocated proportionately among the investors by calculating the scheme's "Net Asset Value, or NAV," after certain costs have been taken into account.
Types of Mutual funds
Mutual funds are available in a variety of forms, each with a unique investment goal and risk profile, including equity funds, stock funds, bond funds, money market funds, index funds, and sector-specific funds. With mutual funds, investors have a wide range of options to try and grow their money, including equities funds ("equity funds"), fixed-income funds ("fixed-income funds"), and balanced funds ("balanced funds") that offer both stock and bond investments.
Simply defined, a mutual fund offers the possibility to participate in a diversified, skillfully managed basket of securities at a reasonably low cost, making it one of the most practical investment options for the anyone.
Before making an investment choice, as an investor, you should carefully read the prospectus of the fund, which contains comprehensive information on the fund's investment strategy, risks, fees, and past performance.
