What is a Mutual Fund?
- A mutual fund is a pool of money managed by a professional money manager.
- The objective and the risk level are outlined in a document called a prospectus. The prospectus provides detailed guidelines for the types of investments the manager can purchase.
- A mutual fund is also known as an open-ended investment fund, which means the fund sells units (of this pool on money) upon request.
What are the benefits of purchasing a mutual fund?
1 Professional Management: The fund company hires talented money managers who have many resources behind them (including a team of people dedicated to researching, tracking, determining trends, and doing thorough analysis), and who work full time on your behalf.
2 Diversification: Lowers the risk because, regardless of the size of your investment, each unit purchased is made up of many different investments.
3 Liquidity: Mutual funds can be sold anytime, and easily
Flexibility: Mutual funds allow you to purchase as much or as little as you want, and offer a variety of purchase plans