What is mutual fund?Defination,All About Mutual fund

                             What is a mutual fund?

Basic definition-

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe and open-ended investment companies in the UK.

It is a trust that collects money from some investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value or NAV.

Types of a mutual fund?

Mutual funds may be classified by their principal investments, as described in the prospectus and investment objective. The four main categories of funds are money market funds, bond or fixed-income funds, stock or equity funds, and hybrid funds.

1. Money market funds-
A money market fund is an open-ended mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. Money market funds are managed to maintain a highly stable asset value through liquid investments while paying income to investors in the form of dividends.

2. Bond or fixed income fund-

A bond fund or debt fund is a fund that invests in bonds or other debt securities. Bond funds can be contrasted with stock funds and money funds. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than CDs and money market accounts. Most bond funds pay out dividends more frequently than individual bonds.

3. Stock or equity funds-
A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a mutual fund or exchange-traded. The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market or maybe gear toward a certain level of risk.

4. Hybrid funds-
A hybrid security is a single financial security that combines two or more different financial instruments. The most common type of hybrid security is a convertible bond that has features of an ordinary bond but is heavily influenced by the price movements of the stock into which it is convertible.

Reason for investment-


1. Mutual Funds Offer Diversification.
2. Mutual Funds Are Professionally Managed.

3. Mutual Funds Come in Many Varieties.
4. Mutual Funds Are Accessible.
5. Many Offer Systematic Investing and Withdrawals.
6. Mutual Funds Offer Automatic Reinvestment.
7. Mutual Funds Offer Transparency.
8. Mutual Funds Are Liquid.
9. Mutual Funds Have Audited Track Records.
10. Mutual Funds Build Wealth.