What is mutual fund?
A mutual fund is a financial vehicle made up with a pool of money collected from many investors to invest in stocks, bonds, money market instrument, and other assets. Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund.
Why mutual fund?
- Built in diversification – A mutual fund holds a variety of investment options to diversify and thus one’s investment is not put in an individual stock or bond. Not all investment performs well at the same time investing in a variety of investment may offset the impact of poor performers.
- Professional portfolio management – As you buy a mutual fund you pay a sum of amount to a professional portfolio manager who buys and sells stocks, bonds, etc. Portfolio managers decide where to invest the money in the fund, and when to buy and sell investments. This professional help saves your time and gives you professional help that minimizes risk.
- Ease of buying and selling – Mutual funds are sold by banks, investment firms, trusted companies, credit unions etc. You can buy funds easily and sell at the time of needs but selling before maturity may get you less than what you invested.
- A wide range of fund to choose from – In accordance with your financial goals, age, and risk-taking ability you can choose which funds to invest in. Be it equity fund, balanced mutual fund, or bond fund.