➤These pooled funds provide thousands of investors with proportional ownership of diversified portfolios managed by professional investment managers. The term ‘mutual’ is used in the sense that all its returns, minus its expenses, are shared by the fund’s units
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➤It is important to understand that a mutual fund is as risky as the underlying assets in which it invests. Though regulations ensure disciplined investments and ceilings on expenses that are
charged to the unit holders, unit holders assume investment or market risk, including the possible loss of principal, because mutual funds invest in securities whose value may rise and fall
In general, the higher the potential return, the higher the risk of potential loss.
Although some funds are less risky than others, all funds have some level of risk –
it’s never possible to diversify away all risk also –
even with so-called money market funds This is a fact for all investments.
Each mutual fund has a predetermined investment objective that tailors the fund’s assets also regions of investments and investment strategies.
At the most basic level, there are three flavors of mutual funds also :
those that invest in stocks (equity funds) also those that invest in bonds (fixed-income funds),
Those that invest in both stocks and bonds (balanced funds), And those that seek the risk-free rate
(money market funds) also.
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