What is Mutual Fund?

A mutual fund is a type of investment vehicle that pools money from many individual investors to purchase a diversified portfolio of stocks, bonds, or other securities. The goal of a mutual fund is to provide a way for individual investors to invest in a professionally managed portfolio of securities, with the aim of achieving a specific investment objective, such as capital appreciation or income generation.

Each mutual fund is managed by a professional fund manager who is responsible for selecting the securities in the fund’s portfolio and making decisions about when to buy and sell those securities. The fund manager uses the pool of money from all the investors to purchase a diverse range of securities, which helps to reduce the risk for individual investors by spreading their investment across many different securities.

Investors in a mutual fund own shares, which represent a portion of the underlying portfolio of securities. The value of a mutual fund’s shares is determined by the net asset value (NAV) of the underlying securities, which is calculated by dividing the total value of the securities by the number of shares outstanding.

There are many different types of mutual funds available, each with a different investment objective and focus, such as stock funds, bond funds, money market funds, and index funds. By choosing a mutual fund that aligns with their investment goals and risk tolerance, individual investors can gain exposure to a diversified portfolio of securities, without having to make the individual investment decisions themselves.

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