A mutual funds is a kind of a company in which investor’s money gets pooled in various types of investments, known as the portfolio. Bonds, Stocks, and funds of money market are the examples of the investments that make up a mutual fund.
Following Mutual funds fall into three categories:
- Equity funds
- Fixed-income funds
- Balanced funds
An investment manager manage Mutual Funds. Manager should have professional skills and competency. Who purchases and sells off the securities for the wealth maximization of the fund. As an investor in the mutual fund, you become a shareholder of the mutual fund. A mutual fund investor earns dividends based on the number of units held by him. Shares value of Mutual Funds investor reduces to loss.
Mutual fund is a close-ended fund or open-ended fund. Most of the people find mutual fund as open-ended funds. While keeping closed-ended mutual fund in a different category.
An Open-ended mutual fund is a fund where the shares are issued by the fund whenever an investor wants them. While a closed-ended mutual fund is a fund where only a certain number of shares (units of mutual fund) can be issued for a specific mutual fund and the shares (units of the mutual fund) can be sold back to the mutual fund only when it terminates by the fund itself. An investor or trader can sell off the shares of closed-ended mutual fund to others on the secondary market, though.
Commissions charged on buying and selling of the shares of the mutual fund known as the load which goes to the salesperson as a commission for their services. However, there are many no-load mutual funds as well. It means there is no fee on sale. An investor can buy directly from the market without the help of any salesperson.