WHAT ARE MUTUAL FUNDS?
Define Mutual Funds?
Mutual Funds is an investment vehicle made up of pooled money collected from investors and managed by professional fund managers.
What is Mutual Funds in more detail?
200 years ago there was a Dutch merchant who’s idea has changed the financial industry. That is by pooling money from different sources, this merchant created the first mutual fund that many believe is an inspiration for the world. Because of this, an average person can now invest with much less risk.
Mutual funds is managed by professional fund managers and they managed the pool money to invest in securities such as stocks, bonds, and short-term debt. The combined funds are known as its portfolio.
An investor can invest his money by buying the shares of a mutual fund and this represents the investors ownership in the fund and the income that generates it but there is a charge fee.
An investor can earn money from his mutual funds shares through dividends. Since mutual funds is being managed by professional fund managers they are responsible on the research, skillful trading, and picking up the stocks for the investors that is why there is a charge fee. Investors who choose to invest in mutual funds are those investors who doesn’t have the time to research, has no skillful trading or expertise to manage their own portfolio.
Investing in mutual funds is a less risk because your shares is spread out across many different holdings. This is what we call diversification. This method is not to put all of your eggs in one basket but to spread your investments across large number of assets so that the loss is minimized.
Mutual fund is so simple to invest in because buying a mutual fund is fairly straightforward. Most banks or brokerage firms have their own mutual funds and the minimum investment is often small.
Mutual funds has transparency that is subject to industry regulation that ensures fairness and accountability to investors.