Mutual funds are merely a set of stocks or bonds that are pooled and sold as one investment (equities). Put plainly, a mutual fund is the connecting bridge or a financial intermediary that allows a group of investors who pool their money together with a particular investment objective. When you invest in a mutual fund, is buying the units or parts of funds and therefore the investment becomes a shareholder or holder of the fund.
All mutual funds have a fund manager who is responsible for collecting money from people and investment in certain securities (shares or bonds). Mutual funds are touted as the best investments available because they offer advantages such as diversification, low risk and maximum return to investors.
How mutual funds work
The mutual fund is managed by a professional investment manager who buys and sells securities for more effective growth of the funds. As an investor in mutual funds, become "shareholders" of the mutual fund company. When profits are earned dividends. When there are losses, its shares will drop in value.
Mutual funds are, by definition, diversified, which means consist of a large number of different investments. That tends to reduce the risk (avoiding the old "all your eggs in one basket" problem). And because another person to drive, you don 't have to worry about diversifying individual investments yourself or doing your own maintenance record. That makes it easier to just buy and forget about them.
The benefits of investing in mutual funds
The main advantage of investing in mutual funds is that there is an option for the diversification of mutual funds. This aspect reduces the amount of risk involved.
Disadvantages of mutual funds
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