What is Mutual Fund ?
A mutual fund is a collection of stocks, bonds, or other securities owned by a group of investors and managed by a professional investment company. For an individual investor to have a diversified portfolio is difficult. Mutual funds have become very popular since they make individual investors to invest in equity and debt securities easy.
When investors invest a particular amount in mutual funds, he becomes the unit holder of corresponding units. In turn, mutual funds invest unit holders money in stocks, bonds or other securities that earn interest or dividend. This money is distributed to unit holders.
Advantages of Mutual Fund :
Professional Management -
The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio.
By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.
Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.