What is mutual fund investment?

Mutual fund is often described as a pool of money, which is made by numerous investors with the main aim of saving or making more money through the investing company. Most people consider investing in mutual funds to be easier than buying or selling individual bonds and stocks. This is because with mutual funds they can sell them whenever they want.

The following include some of the notable characters of mutual funds

Professional management

A professional who uses the investment to create a portfolio usually manages each mutual fund. This portfolio could consist of bonds, stocks, money market or even a combination of these.

Fund ownership

The investor usually owns the shares, which have been invested, but they don’t own the individual securities associated with these funds. Mutual funds usually permit investors to invest smaller amounts of money depending with their set budget. This gives them the chance to benefit form a large pool of cash, which have been invested by different people. All shareholders have a share in the losses and gain which have been made by their mutual fund. This is usually on an equal basis.

Mutual funds are diversified

When an investor invest in mutual funds, their funds is usually diversified across different securities. This is with the main aim of minimizing risk associated with investments. Through this diversifications, investors don’t have to worry about the performance of an individual investment.

Mutual fund objective

There are basically different types of mutual funds and each of these have their own set goals. In most instances the objective goal is usually set by the fund manager .an example can include the fund being primarily used in the equity market with the main aim of providing long term capital appreciation. The main aim of this is usually to meet long-term financial needs. This includes a child’s education.

Mutual funds are mostly classified into five types based on the objective of the investment, they include the following

Aggressive growth usually implies to buying into stock with the chance that a dramatic growth will occur resulting in a rapid raise in the value of the stocks. These investments have a high element of risk because stocks, which have a high price appreciation, have the potential to lose value in a quick manner especially during downturns in the economy.

In these aggressive growth categories, there is usually large , medium and small sized companies. The portfolio of the concerned mutual fund can opt to invest in well-established blue-chip companies with a small portion in small business. The fund manager will pick growth stock and use them for growth of the profit.

Combination of growth and income funds also referred to as balanced funds. These usually result in a mix of goals. Their main aim is to provide investors with a current income while still offering them the chance for growth. Some of these funds usual buy stocks and bind with the main aim of generating income while trying to be ahead of inflation.

Income funds, these are funds, which are invested in a number of fixed-income securities. They are also used bring a regular income

Money market mutual fund, these funds aim at maintaining capital preservation. This means preserving the gain, which has actually already been made. These funds are usually associated with very low risk levels.