What? & Why?
A mutual fund (MF) is a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments etc. This gives small or individual investors access to professionally managed portfolios, therefore, allowoing them to participate proportionally in the gains or losses of the fund. They usually invest in a vast number of securities and performance is usually tracked as the change in the total market cap of the fund derived by the aggregating performance of the underlying investments.
Mutual Funds are divided into several kinds of categories, representing the kinds of securities they have targeted for their portfolios and are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. The portfolio is structured and maintained to match the investment objectives stated in its prospectus. When you buy a unit or share of a mutual fund, you are buying the performance of its portfolio or more precisely, a part of the portfolio’s value.
How it works?