Mutual Fund Basics

Dear Readers, 

It's been long time i come up article, i am sure you are waiting for a nice article, from now onwards i would like to present my readers about article which will give them very nice understanding about mutual funds as well as help them to identify the best mutual funds that hey can construct best portfolio for their better financial future. In Present post i am doing to cove about following point: 

• What are mutual funds.
• Basic type of mutual funds.
• Mutual fund categories. 

Majority of the people know that it's smarter to own a variety of stocks and bonds than to gamble on the successful performance of just a few. But diversifying can be tough because buying a portfolio of individual stocks and bonds can be  expensive. And knowing what to buy & when takes time and concentration. Mutual funds offers one solution, when you put money into a fund,  it's pooled with money from other investors to create much greater buying power than you would have investing on your own. A fund can own multiple different securities, its success isn't dependent on how one or two holding do. 

Mutual Funds makes money in two ways by earning dividends or interest on its investment's and by selling investments that have increased in price. The find distributes, or pays out, these profits to its investors in the different forms (Capital gains, dividends).

When we think about Mutual funds immediately the words come into our minds are OPEN-END FUNDS & CLOSED-END FUND.  

Let look into what is open-end fund: That means the fund sells as many share as investors want. As money comes in fund grows. If investors want to sell, the fund buy their shares back. Some times open-end fund are closed to new investors when they grow too large to be managed effectively. though current shareholders can continue to invest money even though fund is closed this way. Don't worry investment company often creates a similar fund to capitalize on investor interest. Other words in an open-end fund investor can buy & sell the shares of open ended fund at any time. 

Now about closed-end fund: more closely resemble stocks in the way they are traded. While these funds do invest in a variety of securities, they rise money only once and offer only a fixed number of shares that are traded on an exchange or over the country. In Lehman terms investors can't sell these mutual funds for certain time duration, this duration varies from fund to fund. 

Mutual funds are mainly categorized as 3 categories. But always there will be combinations of these three categories may exists. 

• Stock Funds
• Bond Funds
• Money market funds

Stock Funds also called equity oriented funds, invest primarily in stocks. 

Bond Funds invest primarily in corporate or government bonds. 

Money market funds make short-term investments to keep their share value fixed at certain price. 

But now a days there are so many existing funds which mainly focus of certain type of investments. Some example for them are:

Precious metal funds trade chiefly in mining stocks. 

Sector funds buy shares in a particular industry, such as health care, electronics or utilities. 

High-yield bond funds buy risky bonds to produce high income. 

Feel free to write your feedback, comments & questions in so that i can improve the article. 

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