Mutual Fund is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed investment fund that pools money from many investors to purchase securities.
Advantages of investing in mutual funds
- Increased diversification: A fund normally holds many securities; diversification decreases risk.
- Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at the close of every trading day at a price equal to the closing net asset value of the fund’s holdings.
- Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund’s investments.
- Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
- Service and convenience: Funds often provide services such as check writing.
- Government oversight: Mutual funds are regulated by a governmental body
- Ease of comparison: All mutual funds are required to report the same information to investors, which makes them easy to compare.
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