Mutual fund: What is it?

A common pool of money which professional fund managers collect from individuals. Why do they collect these funds? They raise these funds with an objective to invest in various financial avenues.Yes, that is mutual fund in simple terms.

Thus, these are funds operated by professional fund managers. Mutual funds invest in securities such as bonds, stocks, and other assets. The professional money managers allocate the fund's investments and attempt to produce income for the fund's investors. Compared to managing individual stocks or bonds, mutual funds are comparatively easier to handle. They invest in a wide amount of securities. Small or individual investors gain access to professionally managed portfolios of bonds, equities, and other securities. Thus, with any losses or gains in the fund, shareholders participate proportionally.

Mutual funds buy other securities such as stocks and bonds from the money that they collect from the investors. So, the securities that the mutual funds buy determine the value of the mutual fund company. Thus, you are actually buying the performance of the portfolio of the mutual fund's share that you buy.

Mutual Funds Basics