what is a mutual fund?

Answer 1

A mutual fund is an open end investment company under the Investment Company Act.

In other words, it is a fund that continuously offers its shares and continuously redeems them to meet an investment purpose.

An example might help. XYZ Fund has, as its investment purpose, a duty to invest at least 65% of its assets in foreign company stocks. It has 1,253,612 shares on July 1 valued at 10.03 per share. On July 2nd, Mr and Mrs Smith send $1000 to buy shares in XYZ Fund. The value per share at the close of business was 10.05 per share on July 2nd. On July 3rd, their shares are purchased at $1000/$10.05 for 99.502 shares. Mutual funds issue fractional shares. On July 3rd, the fund now has 1,253,711.502 shares. The price on July 3rd fell dramatically to $9.57 per share due to a fall in the SENSEX market. This causes panic for the August family who call on July 5th, due to the holiday, to sell their 953.26 shares. The value of the fund at the close of July 5th was 9.03 per share. On July 8th, due to the weekend, the August family is sent a check for 8607.94. The fund now has1,252,758.242 shares. The value due to continued slide is now 8.96 per share. The value of the Smith's investment is now $891.53.

Unmentioned above is the concept of load and no-load. A load fund pays a commission to a salesman out of our proceeds either when you buy or when you sell. A no load fund pays an introduction fee to a broker to open your shares but it is paid as a general operating expense of all pre-existing shareholders and is hidden in the disclosures.

Answer 2

A mutual fund is a common investment, by mutual consent.

The funds are collected from a large number of investors by the mutual fund agency and then channelised into corporate securities, debentures and bonds in such a way that the investors get appreciation on their capital and/or a steady return either in the form of interest or dividends. A mutual fund company consists of people who are experts at stock market movements and invest in those securities which are guaranteed to rise in value.

Mutual funds are used by people who dont want to take risks by investing directly in the stock market.

Answer 3

Its a mulituted of stocks that you pay expense ratio like1-3% to have managed for you theres different companys and sectors be careful . You're better off with an ETF - Exchange Traded Fund less risk

Answer 4

Go here...

http://www.mfea.com/GettingStarted/LearningTopics/Basics/TheBasics.asp

This tells you what it is, and go to www.mfea.com for all sorts of tools on how to invest, what to invest, etc.