Mutual fund can be termed as a type of investment company or a form of joint investment. Mutual fund provides comparatively safe investment options to the investors. On the other hand, the returns from the mutual funds are also high.
The mutual funds are actually huge funds where a number of investors invest their money. This huge amount is invested in several projects and companies that can provide desired growth to the money. The mutual funds are managed by the fund managers who are selected from the most experienced professionals in the field of finance.
These fund managers are also termed as the portfolio managers. These people shoulder the responsibility of the mutual fund growth that means the growth of the money. The mutual funds invest money in the stocks, bonds, Forex market and in a number of other investment instruments.
Investments in the mutual funds are safe because the funds are managed by the professionals. These professionals know everything about the market. Because of this, they can plan the best strategy for their investment.
The investment portfolios of mutual funds are kept under observation of the fund managers and whenever it is needed, the portfolio is adjusted. On the other hand, an individual investor, when new in the market, can expose his investments to the market risks and may have to face losses. The mutual fund provides returns that are lower than the stocks, however, the returns are almost safe.
There are a number of mutual funds that are differentiated according to their areas of investment.
Some of these types of mutual funds are as follows:
Money market funds
Funds of funds
Again, the mutual funds are subjected to a different set of rules and regulations regarding administration, tax structure and many more. The mutual funds distribute their income among the investors and because of this, no tax is imposed on the income of the mutual funds. In case of certain types of returns, the income is tax-free for the investors also.
Last Updated on : 1st July 2013