Mutual Funds
What is Mutual Fund?
A mutual fund serves as a financial intermediary, allowing investors to pool their money with a predefined investment objective. With a designated fund manager, the pooled funds are invested in specific securities, such as stocks or bonds. Mutual funds stand out as one of the most efficient and accessible investment vehicles, offering cost-effectiveness and simplicity in investment decisions—you’re spared the task of individually selecting stocks or bonds.
How it Works?
A mutual fund comprises stocks, bonds, or other securities collectively owned by a group of investors and managed by a professional investment company. Diversifying a portfolio can be challenging for individual investors, making mutual funds an attractive option as they allow simultaneous investment in equity and debt securities. When investors invest in mutual funds, they become unit holders of corresponding units. Subsequently, mutual funds allocate unit holders’ funds to stocks, bonds, or other securities, generating interest or dividends that are distributed to the unit holders. If the fund realizes capital gains from selling stocks at a higher price, the unit holders are entitled to receive a share of the profits.