About Mutual Fund

A mutual fund is simply an open end professionally managed investing investment fund that pools money from a number of investors to buy various securities. Mutual funds can be either institutional or retail in nature, i.e., they can be traded like stocks on stock exchanges or they can be direct managed by a professional manager. Mutual funds typically invest in a wide variety of financial instruments. Some of these instruments include stocks, bonds, commodities, and securities themselves such as treasury bills, corporate bonds, mortgage-backed securities, option securities, and so on.

Mutual funds have come under the radar over the last few years as an exciting new investment technique for both institutional and retail investors. By pooling small amounts of money from multiple investors, mutual funds can take advantage of different but similar financial situations to make some high frequency investments. The bottom line is, instead of diversifying across different pieces of the stock market, mutual fund investors can now choose to combine their stocks, bonds, and other securities to achieve a similar overall return.

When buying into a mutual fund, the investor typically purchases bonds, stocks, or both, with the goal of diversifying his/her portfolio. This allows the investor to achieve a more balanced portfolio with the added benefit of diversification across asset classes. Because mutual funds typically buy and sell many different stocks and securities, an investor can see a large overall return for a relatively small amount of initial cash outlay. A mutual fund’s success depends on its management and the skill and expertise of its managed funds team.