Mutual Funds
What is a Mutual Fund?
Stocks represent shares in the ownership of companies. When you invest in a company, you own stocks, you share in the profits when that company profits, and when the value of the company grows, so does the value of your stocks. Bonds represent money that has been borrowed by a company or a government agency(they issue government securities). When you invest your money in bonds, you are the creditor and the company or government agency who issues bonds is the debtor. When the loan is repaid to you, as the owner of the bond, you get the money back with interest. But what if you want to invest your money in stocks and bonds but don’t have time to manage you investment? This is where a mutual fund comes in handy. A mutual fund is an investment vehicle that pools the money of many investors to buy a large number of investments. It receives money from investors and then invest those funds on their behalf in a diversified portfolio. By pooling small amounts of money invested by thousands of individuals, a mutual fund can invest in many different stocks, bonds, and other securities. When you buy shares in the fund, you become a part owner of all those investments, and as those investments grow, so will your money. In short, your money will be pooled with other investors’ money and will be managed by professional fund managers. Mutual funds are similar to UITFs or Unit Investment Trust Funds, to make investment much simpler, more accessible, and more cost effective for small investors.
Diversification is the process of investing across different asset classes and across different market environments or spreading of risk by putting the money into several categories of investments such as stocks, bonds, and money market instruments. It is a proven effective in reducing risk without sacrificing returns.
How Investors Make Money with Mutual Funds?
STOCK BASIC GUIDE:
REWARDS AND RISKS OF STOCK INVESTING
TWO WAYS TO INVEST IN THE STOCK MARKET
