A mutual Fund is a pool of money from numerous small investors and who wish to save money or makes money. Investing in mutual funds is bit easier when compared to investing in stocks.
By investing in Mutual funds one could diversify their portfolio with large number of securities so as to minimize risk. As the size of portfolio is big ones need not worry about the daily fluctuations in individual stocks.
There are many different types of mutual funds each with its own set of goals. Depending up on investment objectives Mutual funds can be classified in to 5 categories:
- Aggressive Growth funds
- Growth funds
- Balanced funds
- Income funds
- Money market mutual funds.
Mutual funds can also be classified as Closed-end funds and open-ended funds.
A closed-ended fund has fixed number of shares outstanding and operates for a fixed duration (generally ranging from 3 to 15 years).The fund would be open for subscription only during a specified period .these closed-ended funds are listed on stock exchange and are traded like stocks.
An open-ended fund is one that is available for subscription all through the year and is not listed on the stock exchange. Investors can buy or sell units at any point of time. Their performance can be tracked using NAV( Net asset value).