What is a “mutual fund” and why would I want to invest in it?
A mutual fund (technically known as an investment company) is a corporation or other business entity that uses the money contributed by its shareholders to invest in securities of many different companies, usually with the goal of increasing capital or providing income. Each fund has its own investment strategies and objectives, dividend policies and shareholder services. An investment company provides three things usually not available to the small investor: broader diversification of portfolio, professional management, and constant supervision of investments. Many investment companies also provide investors considerable liquidity. A mutual fund is managed by a professional investment adviser. In return for its services, the adviser is paid a fee called a “management fee” which is most often calculated as a percentage of the fund’s average daily assets. Thus, the adviser will profit more when the investor’s shares increase in value. Mutual funds are generally recommended for investors
Related Questions
- What other funds in the current plan lineup are closed to new investors? Will any of the closed funds be available to participants who invest in the new self-directed mutual fund window?
- As mutual fund schemes invest only in stock markets, are they suitable for small investors?
- Does an NRI, FII require any approval from the RBI to invest in mutual fund schemes?
