Mutual Funds Essay Example | Topics and Well Written Essays - 2000 words

Mutual Funds - Essay Example similarly we can outline the concept of bonds. Bonds gives people chance to lend our money to the government or a company. We receive interest and principle back over pre-determined amount of time. We can say that bonds are the most common lending investments traded on the market. Other than shares and bonds there are other types of investments like real estate and precious metals but it is generally perceived that mutual funds mostly invest in stocks and bonds. Many definitions have written by people but essentially all dwell upon the same idea regarding its concept. So a mutual fund can be defined as a financial intermediary that allows a certain group of investors to pool their money together with a pre-determined investment objective. Here in mutual fund there exists a fund manager who trades the fund's underlying securities. He then can realize capital gains or loss and then collects the dividend. Whenever we invest in a mutual fund, we are buying shares of the mutual fund and thus in the process becoming a shareholder of the fund. After the dividend income is found, the investment proceeds are then passed to the individual investors. We then calculate the value of the share of the mutual fund which is known as net asset value. ... ies we can say that it is one of three types of investment companies in the United States and outside United States & Canada mutual fund can termed as generic word for various types of collective investments. Types of Mutual Funds There exist few common types of mutual funds and they are outlined as follows: Money Market funds, fixed income funds, equity funds or growth funds, balanced funds, global funds, specialty funds and index funds. Lets describe each of them briefly so as the understand the whole concept clearly. Monet Market Funds: These are generally perceived as low risk funds offering low returns. These are a type of mutual funds that invest in a short term debt securities of agencies like banks U.S Treasury bills. They have advantages of being widely used, low risk and highly liquid in nature. Fixed income funds It is a type of mutual funds which invest in debt securities like bonds and mortgages. The main goal is to provide the investors with regular income with low risk. Here in this type fund values fluctuate in response to changes in interest rates Equity Funds Equity funds are also called as growth funds. It invests primarily in common shares. The goal is to have long term growth because the value of the assets held usually increase over time. Some funds focus on blue chip companies and others on smaller companies. Balanced Funds It invests in a balanced portfolio of equities, debt securities with the goal of providing reasonable returns with low to moderate risk Global and foreign funds It is a type of mutual fund which may be fixed income or growth or balanced funds and which invest in foreign securities. Specialty funds It is a type of mutual fund which invests primarily in a specific geographic location or a specific