What Are Mutual Funds?
January 17, 2012 | In: Mutual Funds
So what are Mutual Funds? Mutual Funds refer to funds that are raised and invested mutually. If two people invest their funds together, they have just created a mutual fund. Mutual funds are a company or a fund managed by a fund manager where people like you or me invest their money into and the fund manager takes care of investing those funds properly using their expertise to give the investors good returns. People invest into mutual funds when they feel that they don’t have the time and knowledge to do the investment themselves and expect fund managers to do the job on behalf of them. So in short, mutual funds are investment companies that depending on what kind of fund it is, invests appropriately. Think of mutual funds as a company where in you buy units or shares of that fund by investing your money and with proper skilled investing the price of the fund grows and thus your money.
There are two types of mutual funds – open ended and close ended. An open ended mutual fund is going to sell it’s shares without a limit and a close ended mutual fund has limited number of shares. Some mutual funds are based on equity funds and some are debt funds. It is you to decide which type of investment suits you, high risk and high return or low risk low return investment.
One of the question in everyone’s mind is if Mutual Funds are risk free? Well no form of investment is actually risk free unless you take into consideration the fixed deposits but I’d rather call it saving than investing. Mutual funds are so popular in India even though it is not risk free. It is because a lot of Mutual funds are very well managed by expert fund managers and your job is limited to finding a good mutual fund to bet your money on. You pay some charges to the mutual funds to manage your money and in return they invest your money properly making your money grow over time. The best part of Mutual Funds are that you see your money grow without you doing anything. Your job is done in the beginning when you’ve identified a good fund to invest into. Sit tight and enjoy!
Related posts: