What is Mutual fund investment?

Question

Is there any site which shows demo on how to do investments all those things?

Answer 1

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. [1] In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value (NAV), is calculated daily based on the total value of the fund divided by the number of shares purchased by investors.

Legally known as an "open-end company", a mutual fund is one of three basic types of investment companies available in the United States. [2] Outside of the U.S. (with the exception of Canada which follows the US model), mutual fund is a generic term for various types of collective investment. In the UK and western Europe (including offshore jurisdictions) other forms of collective investment are prevalent including unit trusts, Open-Ended Investment Companies (OEICs),

History

The first open-end mutual fund, Massachusetts Investors Trust was founded on March 21, 1924, and after one year had 200 shareholders and $392,000 in assets. The entire industry, which included a few closed-end funds, represented less than $10 million in 1924.

The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the SEC and provide prospective investors with a prospectus. The SEC (U.S. Securities and Exchange Commission) helped create the Investment Company Act of 1940 which provides the guidelines that all funds must comply with today.

In 1951, the number of funds surpassed 100 and the number of shareholders exceeded 1 million. Only in 1954 did the stock market finally rise above its 1929 peak and by the end of the fifties there were 155 mutual funds with $15.8 billion in assets. In 1967 funds hit their best year, one quarter earning at least 50% with an average return of 67%, but it was done by cheating using borrowed money, risky options, and pumping up returns with privately traded "letter stock". By the end of the 60's there were 269 funds with a total of $48.3 billion.

With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s there were around 270 funds with $48 billion in assets. The first retail index fund was released in 1976, called the First Index Investment Trust. It is now called the Vanguard 500 Index fund and is one of the largest mutual funds ever with in excess of $100 billion in assets.

One of the largest contributors of mutual fund growth was Individual Retirement Account (IRA) provisions made in 1975, allowing individuals (including those already in corporate pension plans) to contribute $2,000 a year. Mutual funds are now popular in employer-sponsored defined contribution retirement plans (401k), IRAs and Roth IRAs.

As of April 2006, there are 8,606 mutual funds that belong to the Investment Company Institute (ICI), the national association of Investment Companies in the United States, with combined assets of $9.207 trillion USD.[3]

Types of mutual funds
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Open-end fund

The term Mutual fund is the common name for an open-end investment company. Being open-ended means that at the end of every day, the investment management company sponsoring the fund issues new shares to investors and buys back shares from investors wishing to leave the fund.

Mutual Funds may be legally structured as corporations or business trusts but in either instance are classed as open-end investment companies by the SEC.

Other funds have a limited number of shares; these are either closed-end fund or unit investment trusts neither of which are mutual funds.
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Exchange-traded funds

Main article: Exchange-traded fund

A relatively new innovation, the exchange traded fund (ETF), is often formulated as an open-end investment company. The way ETFs work combines characteristics of both mutual funds and closed-end funds. An ETF usually tracks a stock index (see Index funds). Shares are only created or redeemed by institutional investors in large blocks (typically 50,000 shares). Investors typically purchase shares in small quantities through brokers at a small premium or discount to the net asset value through which the institutional investor makes their profit. Because the institutional investors handle the majority of trades, ETFs are more efficient than traditional mutual funds and therefore tend to have lower expenses. ETFs are traded throughout the day on a stock exchange, just like closed-end funds.
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Equity funds

Equity funds, which mainly consist of stock investments, are the most common type of mutual fund. Equity funds hold 50 percent of total funds invested in mutual funds in the United States. [5] Oftentimes equity funds focus investments on particular strategies and certain types of companies.
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Capitalization

Some mutual funds focus investments on companies of particular size ranges, with size measured by their market capitalization. The size ranges include micro-cap , small-cap, mid-cap, and large-cap. Fund managers and other investment professionals have varying definitions of these market cap ranges. The following ranges are used by Russell Indexes [6] include:

* Russell Microcap Index ($54.8 - 539.5 million)
* Russell 2000 - small cap ($182.6 million - 1.8 billion)
* Russell Midcap Index ($1.8 - 13.7 billion)
* Russell 1000 - large cap ($1.8 - 386.9 billion)

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Growth vs. value

Another division is between growth funds, which invest in stocks of companies that have the potential for large capital gains, versus value funds, which concentrate on stocks that are undervalued. Growth stocks typically have a potential for larger return, however such investments also bear larger risks. Growth funds tend not to pay regular dividends. Sector funds focus on specific industry sectors, such as biotechnology or energy. Income funds tend to be more conservative investments, with a focus on stocks that pay dividends. A balanced fund may use a combination of strategies, typically including some investment in bonds, to stay more conservative when it comes to risk, yet aim for some growth.
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Index funds versus active management
Main articles: Index fund, active management.

An index fund maintains investments in companies that are part of major stock indices, such as the S&P 500, while an actively-managed fund attempts to outperform a relevant index through superior stock-picking techniques. The assets of an index fund are managed to closely approximate the performance of a particular published index. Since the composition of an index changes infrequently, an index fund manager makes fewer trades, on average, than does an active fund manager. For this reason, index funds generally have lower trading expenses than actively-managed funds, and typically incur fewer short-term capital gains which must be passed on to shareholders. Additionally, index funds do not incur expenses to pay for selection of individual stocks (proprietary selection techniques, research, etc.) and deciding when to buy, hold or sell individual holdings. Instead, a fairly simple computer model can identify whatever changes are needed to bring the fund back into agreement with its target index.

The performance of an actively-managed fund largely depends on the investment decisions of its manager. Statistically, for every investor who outperforms the market, there is one who underperforms. Among those who outperform their index before expenses, though, many end up underperforming after expenses. Before expenses, a well-run index fund should be average. By minimizing the impact of expenses, index funds should be able to perform better than average.

Certain empirical evidence seems to illustrate that mutual funds do not beat the market and actively managed mutual funds under-perform other broad-based portfolios with similar characteristics. [7] finds that nearly 1,500 U.S.A. mutual funds under-performed the market in approximately half the years between 1962 and 1992. Moreover, funds that performed well in the past are not able to beat the market again in the future (shown by Jensen, 1968; Grimblatt and Titman, 1989.[8] However, as quantitative finance is in its early stages of development more accurate studies are required to reach a decisive conclusion.[citation needed]
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Bond funds

Bond funds account for 18% of mutual fund assets. [9] Types of bond funds include term funds, which have a fixed set of time (short, medium, long-term) before they mature. Municipal bond funds generally have lower returns, but have tax advantages and lower risk. High-yield bond funds invest in corporate bonds, including high-yield or junk-bonds. With the potential for high yield, these bonds also come with greater risk.
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Money market funds

Money market funds hold 26% of mutual fund assets in the United States. [10] Money market funds entail the least risk, as well as lower rates of return. Unlike certificate of deposits (CDs), assets in money market funds are liquid and redeemable at any time. The interest rate quoted by money market funds is known as the 7 Day SEC Yield.
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Hedge funds

Main article: Hedge fund

Hedge funds in the United States are pooled investment funds with loose SEC regulation, and should not be confused with mutual funds. Certain hedge funds are required to register with SEC as investment advisers under the Investment Advisers Act. [11] The Act does not require an adviser to follow or avoid any particular investment strategies, nor does it require or prohibit specific investments. Hedge funds typically charge a fee greater than 1%, plus a "performance fee" of 20% of a hedge fund's profits. There may be a "lock-up" period, during which an investor cannot cash in shares.

Answer 2

Mutual Funds are a safer way to invest in the stock market, I have not come across a reliable website which has all the information under one roof but there are a lot of Financial institutions websites that have good ingormation like ICICI or HDFC.
The plans that the MF's are coming up now a days are much better than earlier, there might be a lock-in period of 3 years with a few MF's.

Answer 3

I am one of the dealer in mutual funds. You can visit the website of www.valueresearchonline.com, www.moneycontrol.com etc.,

Though there is some amount of risk in investing in equity mutual funds, there are chances of making money over a period of 7 to 10 years investment through systematic investment plans by starting a small amount of investment of Rs 1000 p.m

Thanks for the opportunity for answering this nice question

Answer 4

A mutual fund is an entity that pools the money of many investors its unit-holders to invest in different securities. Investments may be in shares, debt securities, money market securities or a combination of these.

Answer 5

You may want to check this site out by the Mutual Fund Education Alliance: http://www.mfea.com

The menu on the left of the page should provide you with useful info.

Answer 6

there is nothing to demo. Contact Vanguar or fildelity or Schwab.com & pick out a fund (an index fund if a novice) & buy it. Nothing to learn or know in the purchasing part.

Answer 7

Log on to

http://www.valueresearchonline.com

to clear all your queries on mutual Funds

Answer 8

please check up:

www.icicidirect.com
www.hdfcsec.com
I have listed only banking sites, wherefrom your subscription to the fund also will be online.