Question

define the topic and write least five things about this topic (2paragraph)

Investing in mutual funds

Answer 1

Investing in mutual funds

Mutual fund is a financial instrument which involves collecting a small and variable amount of money from multiple investors for the purpose of investing in capital markets. The money collected may be invested in various capital market instruments such as equity, bonds, money market instruments, etc. depending on the type of mutual fund. The key investment characteristics of a mutual fund is defined before reaching out to investors for money. For instance, mutual funds can be categorised in terms for investment strategy (value funds, growth funds, momentum funds), type (open ended, closed ended) and so on.

Mutual funds are generally used by retail investors who do not the necessary time and expertise to analyse and invest in the capital market, particularly in the stock market. By way of mutual funds, a retail investor is able to get the benefit of the expertise of a fund manager which may help in achieving a higher return than the market. Investing in mutual funds is a great way of diversification as mutual funds generally invest in a variety of asset classes. open ended funds are those wherein an investor can invest and divest at any time he wants. On the other hand, in a closed ended fund, there is a lock-in period before the expiry of which the investors cannot redeem their investment amounts.