What Is The Meaning Of Mutual Funds ?

What Is The Meaning Of Mutual Funds ?

Mutual funds are basically investment funds where the investment companies collect money from the investors and invest the same in various stocks of different companies and government bonds.

Mutual funds are also affected by the market fluctuations and different mutual funds have different prices which vary as per the variations in the stock market. But the key advantage of mutual funds is that they are less risky than stocks because the investment in mutual funds is generally diversified. The investors have the option of selling off their units or their share in the mutual fund as and when they wish. There are certain types of stocks where there may be a certain lock in period or a fixed duration during which the sale may not be allowed.  

Investors of mutual funds prefer to sell their units when the prices of the same have increased to more than the purchase price and at a time when they are sure to get profits. While investing in mutual funds the investors need to check where the mutual fund is investing the money because there may be some funds that invest only in stocks while some may invest only in fixed income securities and there may be some other fund which invests partly in stocks and partly in securities.

One thing is for sure, that these investments are not decided by just anybody in the company, but instead there are professionals who are hired to decide where all the funds will invest their money and there is a lot of research and analysis that goes into these decisions.

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