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Mutual Fund: Different Types of Mutual Funds.
by Admin
Category : Finance |
For Newbie, prior to investing, you should be having an Idea as to what stocks, funds and shares are and why are they invested upon. A mutual fund is a collection of stocks and bonds that are owned by a group of people rather than one individual investor. Just like stocks, mutual funds have a price per share, also known as the Net Asset Value (NAV). The price fluctuates on a daily basis and it can be sold just like any other security.
The performance of mutual fund depends mainly on the efficiency of fund manager who manages portfolio of stocks on behalf of investors. Mutual fund have lower risks than many other investment options, that makes them an attractive buy for those who lacks proper up-to date knowledge and skills in investment market. Mutual funds often have much better rates of return than the average savings account at your local bank and the risks are minimal in this type of investment.
Generally, there are three types of mutual fund, money market funds, bond funds/ fixed income funds, and stock funds/ equity funds. Each type has different features and different risks and rewards.
Money market funds have relatively low risks, compared to other mutual funds. Investor losses have been rare, but they are possible. Bond funds have higher risks than money market funds, largely because they typically pursue strategies aimed at producing higher yields. Stock funds have higher risks because a stock fund's value can rise and fall quickly over the short term.
The rate of returns in mutual funds is based on the increase or decrease of the value, during a specific period. Returns of a fund indicate the track record. It is important to remember that the past performance cannot guarantee future results.
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