GUJARAT POLICE BHARATI EXAM DATE RELETED.
A mutual fund is both an investment and an actual company.
This may seem strange, but it is actually no different than how a share of APL
is a representation of Apple, Inc. When an investor buys Apple stock, he is
buying part ownership of the company and its assets. Similarly, a mutual fund
investor is buying part ownership of the mutual fund company and its assets.
The difference is Apple is inthe business of making smartphones and tablets,
while a mutual fund company is in the business of making investments.Mutual
funds pool money from the investing public and use that money to buy other
securities, usually stocks and bonds. The value of the mutual fund company
depends on the performance of the securities it decides to buy. So when you buy
a shareof a mutual fund, you are actually buying the performance of its
portfolio.
A mutual fund is both an investment and an actual company.
This may seem strange, but it is actually no different than how a share of APL
is a representation of Apple, Inc. When an investor buys Apple stock, he is
buying part ownership of the company and its assets. Similarly, a mutual fund
investor is buying part ownership of the mutual fund company and its assets.
The difference is Apple is inthe business of making smartphones and tablets,
while a mutual fund company is in the business of making investments.Mutual
funds pool money from the investing public and use that money to buy other
securities, usually stocks and bonds. The value of the mutual fund company
depends on the performance of the securities it decides to buy. So when you buy
a shareof a mutual fund, you are actually buying the performance of its
portfolio.
Mutual funds invest in stocks, but certain types also invest in government and
corporate bonds. Stocks are subject to the whims of the market and thus offer a
higher return potential than bonds, but they also present more risk. Bonds, by
contrast, provide a fixed return that is usually much lower than what an
investor gets from stocks. The advantage of bonds is they are low risk. Only in
an extreme situation, such as the complete failure of acorporation, does an
investor not receive the return he was promised from a bond security. A mutual
fund's investment profile depends on the type of fund. There are three main
types: equity funds, fixed-income funds and balanced funds.
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