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Mutual funds (i2tutorials)

Finance in mutual funds

What are Mutual Funds?

Mutual funds are investment funds containing a lot of money from different sources like stocks, bonds, and other assets. 

Operated by professional managers, produce capital gains from the fund’s assets for the fund’s investors. These funds give layman the access of professional managers with the knowledge of equities, stocks, bonds, and much more.

Mutual funds have different types of categories, depending on the kind of security you invest in keeping in mind your goals and objectives. 

Annual fees are charged by these mutual funds and at time commission too, which could affect returns.

How do Mutual Funds work?

A mutual fund is a company, as well as an investment. A buyer of a mutual fund is buying some of the company’s assets and partial ownership.

How does a buyer get returns on his Mutual Funds?

  1. They get dividends on stocks of the mutual fund as well as the interest on bonds.
  2. Securities, if sold at a higher price.
  3. Price increment of fundholding, then the buyer would be able to sell their mutual fund at a profit.

Types of Mutual Funds

  1. Equity Funds – Equity funds get categorized on the size of the company they invest in, and domestic or international investments.
  2. Fixed-Income Funds – It focuses on the set rate of return from a particular investment like the corporate bonds, government bonds, and different debts.
  3. Index Funds – The investor of Index funds will buy stocks that are in a primary market index.
  4. Balanced Funds – These invest in bonds and stocks both to minimize the risk.
  5. Money Market Funds – Short-term investments with no risk consist of the Money Market Funds.

And many more.

Advantages of Mutual Funds

  1. Mixing of assets and investments in a portfolio to decrease the risk involved, calls out for some diversification. It is one of the most significant advantages of Mutual Funds.
  2. You can access mutual funds on an application as well. Do not need to move around too much for it.
  3. With the help of a single buying Mutual Fund, the investor is away from commissions of any sort.
  4. Your professional manager will take care of all your needs and investments.
  5. You can select any mutual fund and invest in it. You have the liberty and freedom of choice.

Disadvantages of Mutual Funds

  1. Mutual funds have high fees and other charges.
  2. You cannot predict your income steadily.
  3. You cannot have control over gains recognition.
  4. You cannot customize your selections.

Investing in Mutual funds is always an excellent opportunity for a new source of income. Though you cannot know precisely how much you will earn every month, you will still be able to make some good cash over them. You can always ask your banks for investing. Investing is like crossing a road. You have to look both ways and then decide on your own if you want to pass or no. Though investing could be a fantastic way of earning extra income, it could also sometimes eat your pockets.
Think it through and invest smartly.

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