Mutual Funds and Its Types: : Understanding the Basics of Mutual Funds
Mutual Funds and Its Types: A mutual fund is a kind of investment instrument that collects funds from many different participants to buy a diverse portfolio of securities, including stocks, bonds, or other assets. Professional fund managers that specialize in managing mutual funds use their knowledge to make investment decisions on behalf of the fund's investors. When an investor buys shares in a mutual fund, they are essentially buying a small piece of the fund's overall portfolio. The value of these shares fluctuates based on the performance of the underlying securities held by the fund. If the value of the securities in the fund goes up, the value of the investor's shares will also go up. Conversely, if the value of the securities goes down, the value of the investor's shares will go down as well. Benefits of Mutual Funds Diversification: Mutual funds offer diversification by investing in a broad range of assets, which helps reduce risk. This is especially useful fo...