WHY MUTUAL FUND IS REQUIRED

February 11, 2020 0 By admin

Price is what you pay. Value is what you get

Introduction of Mutual Funds

Mutual Fund is a Fool Money Collected Form the Investors to invest in the Stocks, Bond, Money Market Instruments and Other Assets. Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund. Mutual funds 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

Understanding the Mutual Funds

Mutual funds pool money from the investing public and use that money to buy other securities, usually stocks and bonds. The value of the mutual fund company depends on the performance of the securities it decides to buy. So, 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. Investing in a share of a mutual fund is different from investing in shares of stock. Unlike stock, mutual fund shares do not give its holders any voting rights. A share of a mutual fund represents investments in many different stocks (or other securities) instead of just one holding.

That’s why the price of a mutual fund share is referred to as the net asset value (NAV) per share, sometimes expressed as NAVPS. Outstanding shares are those held by all shareholders, institutional investors, and company officers or insiders. Mutual fund shares can typically be purchased or redeemed as needed at the fund’s current NAV, which unlike a stock price doesn’t fluctuate during market hours, but it is settled at the end of each trading day. The average mutual fund holds hundreds of different securities, which means mutual fund shareholders gain important diversification at a low price

Key Elements of Mutual Funds

A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities

Mutual funds charge annual fees (called expense ratios) and, in some cases, commissions, which can affect their overall returns

The overwhelming majority of money in employer-sponsored retirement plans goes into mutual funds

Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price

The overwhelming majority of money in employer-sponsored retirement plans goes into mutual funds

TYPES OF MUTUAL FUNDS
Mutual Fund is Classified into 9 Types Listed are Show in the below with Explanation.
A) Equity Funds: – It’s an Equity/Stock fund this is a Largest Category of Mutual Fund Within this group are various subcategories. Some equity funds are named for the size of the companies they invest in small, mid, or large cap. The idea here is to classify funds based on both the size of the companies invested in (their market caps) and the growth prospects of the invested stocks. The term value fund refers to a style of investing that looks for high-quality, low-growth companies that are out of favor with the market these companies are characterized by low price-to-earnings (P/E) ratios, low price-to-book (P/B) ratios, and high dividend yields. Conversely, spectrums are growth funds, which look to companies that have had (and are expected to have) strong growth in earnings, sales, and cash flows. These companies typically have high P/E ratios and do not pay dividends

B) Fixed Income Funds: – A fixed-income mutual fund focuses on investments that pay a set rate of return, such as government bonds, corporate bonds, or other debt instruments. The idea is that the fund portfolio generates interest income, which it then passes on to the shareholders bond funds, these funds are often actively managed and seek to buy relatively undervalued bonds in order to sell them at a profit. These mutual funds are likely to pay higher returns than certificates of deposit and money market investments, but bond funds aren’t without risk. Because there are many different types of bonds, bond funds can vary dramatically depending on where they invest

C) Index Funds: – Another group, which has become extremely popular in the last few years, falls under the moniker “index funds.” Their investment strategy is based on the belief that it is very hard, and often expensive, to try to beat the market consistently,

D) Balanced Funds: – Balanced funds invest in both stocks and bonds to reduce the risk of exposure to one asset class or another. Another name for this type of mutual fund is “asset allocation fund.” An investor may expect to find the allocation of these funds among asset classes relatively unchanging, though it will differ among funds. This fund’s goal is asset appreciation with lower risk. However, these funds carry the same risk and can be as subject to fluctuation as other classifications of funds.

E) Money Market Funds:- it’s an Risk free and Short term debt Instrument you Can invest in money Less than one Year.

F) Income Fund:- provide current income on a steady basis. These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity in order to provide interest streams. While fund holdings may appreciate in value, the primary objective of these funds is to provide steady cash flow to investors

G) International Fund:- An international fund (or foreign fund) invests only in assets located outside your home country. Global funds, meanwhile, can invest anywhere around the world, including within your home country. It’s tough to classify these funds as either riskier or safer than domestic investments, but they have tended to be more volatile and have unique country and political risks. On the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by increasing diversification, since the returns in foreign countries may be uncorrelated with returns at home. Although the world’s economies are becoming more interrelated, it is still likely that another economy somewhere is outperforming the economy of your home country

H) Specialty Funds: – This classification of mutual funds is more of an all-encompassing category that consists of funds that have proved to be popular but don’t necessarily belong to the more rigid categories we’ve described so far. These types of mutual funds forgo broad diversification to concentrate on a certain segment of the economy or a targeted strategy. Sector funds are targeted strategy funds aimed at specific sectors of the economy, such as financial, technology, health, and so on. Sector funds can, therefore, be extremely volatile since the stocks in a given sector tend to be highly correlated with each other. There is a greater possibility for large gains, but a sector may also collapse (for example, the financial sector in 2008 and 2009).Regional funds make it easier to focus on a specific geographic area of the world. This can mean focusing on a broader region (say Latin America) or an individual country (for example, only Brazil). An advantage of these funds is that they make it easier to buy stock in foreign countries, which can otherwise be difficult and expensive. Just like for sector funds, you have to accept the high risk of loss, which occurs if the region goes into a bad recession. Socially-responsible funds (or ethical funds) invest only in companies that meet the criteria of certain guidelines or beliefs. For example, some socially-responsible funds do not invest in “sin” industries such as tobacco, alcoholic beverages, weapons, or nuclear power. The idea is to get competitive performance while still maintaining a healthy conscience. Other such funds invest primarily in green technology, such as solar and wind power or recycling

I) Exchange trade Funds: – These ever more popular investment vehicles pool investments and employ strategies consistent with mutual funds, but they are structured as investment trusts that are traded on stock exchanges and have the added benefits of the features of stocks. For example, Exchange trade Funds can be bought and sold at any point throughout the trading day. Exchange trade Funds can also be sold short or purchased on margin. Exchange trade Funds also typically carry lower fees than the equivalent mutual fund. Many Exchange trade Funds also benefit from active options markets, where investors can hedge or leverage their positions. Exchange trade Funds also enjoy tax advantages from mutual funds. The popularity of Exchange trade Funds speaks to their versatility and convenience

MUTUAL FUND REQUIRED:

1) A wide range of funds to choose from Mutual Fund
2) Easy to buy and Sell
3) Managing in professional
4) Wide Range of of Funds
5) Easy Access
6) Variety and Freedom of Choice
7) Transparency
8) Minimal investment requirements
9) Variety of offering

Price is what you pay. Value is what you get