Employment and Training Department Gandhinagar “Mahila Rojgar Bharti Melo” (22-07-2017)
A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment.
A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment.
No matter what type of investor you are, there is bound to be a mutual
fund that fits your taste.It's important to understand that each mutual
fund has different risk and reward profiles. In general, the higher the
potential return, the higher the risk of potential loss. Although some
funds are less risky than others, all funds have some level of risk –
it's never possible to diversify away all risk – even with so-called
money market funds. This is a fact for all investments. Each mutual fund
has a predetermined investment objective that tailors the fund's
assets, regions of investments and investment strategies.At the most
basic level, there are three flavors of mutual funds: those that invest
in stocks (equity funds), those that invest in bonds (fixed-income
funds), those that invest in both stocks and bonds (balanced funds), and
those that seek the risk-free rate (money market funds). Most mutual
funds are variations on the theme of these three asset classes.Let's go
over some of the many different flavors of funds. We'll start with the
safest and then work through to the more risky.
The money market consists of safe (risk-free) short-term debt
instruments, mostly government Treasury bills. This is a safe place to
park your money. You won't get substantial returns, but you won't have
to worry about losing your principal. A typical return is a little more
than the amount you would earn in a regular checking or savings account
and a little less than the average certificate of deposit (CD). While
money market funds invest in ultra-safe assets, during the 2008
financial crisis, some money market funds did experience losses after
the share price of these funds, typically pegged at $1, fell below that
level and broke the buck.
Income funds are named for their purpose: to provide current income on a
steady basis. These funds invest primarily in government and
high-quality corporate debt, holding these bonds until maturity in order
to provide interest streams. While fund holdings may appreciate in
value, the primary objective of these funds is to provide a steady cash
flow to investors. As such, the audience for these funds consists of
conservative investors and retirees. Because they produce regular
income, tax conscious investors may want to avoid these funds.