How mutual funds work
A mutual fund allows investors to pools money with a common investment objective. It then invests the money in various asset classes based on the scheme’s objectives.
As an investor, you put your money in financial assets like stock, bonds and other securities. You can either buy them directly or use investment instruments like mutual funds. Mutual funds have certain advantages over direct investments. For example, maybe you lack the skill to understand market trends yourself, or do not have the time to follow the market closely. Mutual funds are a great alternative in this case as they are managed by professionals. But how do mutual funds work? Here is a handy guide to what you should know.
MUTUAL FUND AS AN INVESTMENT OPTION
A mutual fund is an investment vehicle that pools money from investors with a common investment objective. It then invests the money in various asset classes like equities and bonds based on the scheme’s objectives. An asset management company (AMC) makes these investments on behalf of the investors. The team that manages a mutual fund picks the stocks which investors’ money will be put into based on clearly defined investment objectives