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in a mutual fund you pay someone a fee to lose money for you…in the share market you lose money on your own
A mutual fund is a collection of many shares chosen by a group of people who are basically saying, we know what the best shares to invest in are. You give them your money and they give you a little of each share that they own. For example, if a mutual fund is made up of 10 different shares, then by owning a part of the mutual fund you own a percentage of each one of the ten shares.
A share in the share market is a single unit of stock. Owning one share is like owning one very small piece of a company.
share market is where you have to intract directly with share market where the profit and loss will have impact on you and you should have sound knowledge. but mutula fund is where fund managers decison and imapact is not directly on you
experience person or companies will care about your investment is mutual fund
when u are talking about invesments in a share market, then u are investing or buying up ownership in a firm to extent of ur capital. you are buying only the equity shares in a stock market. you make the profit or loss depending on the price movement of your share. u face a huge risk here if the firm is underperforming as u are restricting to this firm alone. this means u are not diversifying your investments. but when u go for a mutual fund, the fund manager will pick stocks from various industries and invests in them. one industry will fail but others may boom, thus reducing your risk. but wise fund managers will choose bonds, debentures, treasury bills and even invest in other mutual funds. thus it covers all areas and diversifies its risk profile. but there have been instances where even fund managers pick wrong areas. and they charge professional fees as well. so at times investing in mutual funds can incurr loss than in share market. so investing in share market will be focussed on one firm wherein mutual funds will focus on many firms and even on other mutual funds.
Mutual Fund – Collection of numerous investors money and invested into variety of investment avenues by experts (Fund managers). Variety of investment avenues could be, shares (equity), Debt, etc.
Share Mkt – you need to invest directly into the companies shares via stock market. You need to have adquate rescearch before investing
A mutual fund is a type of investment vehicle where investors pool their money in order to allow each investor participate in a portfolio of securities. The individual investor doesn’t actually own each security but instead, he owns shares of the mutual fund. The main benefit of a mutual fund is that it provides a way for the investor to achieve diversification in his investments without having to invest a a lot of money.
The first mutual fund was the Massachusetts Investors Trust introduced in 1924. At the end of it’s first year, the fund had 200 investors with $ 63,600 in assets. At the end of 1995, the fund grew to 73,500 investors with assets totalling $ 1.8 billion! Now there are over 7000 different mutual funds available for you to choose from.
You may be wondering why you should choose a mutual fund. Simple – a mutual fund offers 2 large benefits over owning the stocks individually. Those benefits are diversification with professional management without having to invest a lot of money.
Diversification is important because it helps to reduce the risk. By owning shares of multiple
companies, the fund’s share value is not devastated if an individual company has a poor performance.
Selecting which securities to buy, the allocation of cash and securities, and when to purchase is all done by the fund manager or the management team. The fund manager has the training, time and the resources to make the best informed investment decisions.
Also, he fund may be part of a family of funds where the investor can switch between funds at no additional cost, including switching in and out of a money market funds. Most mutual funds include some degree of check writing privileges and may offer automatic transfer of funds on a periodic basis like monthly for those who want to regularly invest a set dollar amount. This type of investment is called dollar cost averaging.
Types of Mutual Funds Available:
Domestic Equity Funds – These mutual funds mainly focus on stocks offered by different U.S. companies. With this type of fund there is a wide range of offerings that takes into consideration the size of the company, the stability of the company, growth and the potential valueof the company.
Global/International Funds – Global or International mutual funds mainly allow the investor to include foreign equities into their investments. Although deemed slightly riskier their values do tend to go up when domestic equities drop, offering a balance to the investors portfolio.
Sector Funds – sector funds give the investor a way to focus on specific parts of the business world. For example, niches like real estate, precious metals or financials. If an investor is able to tolerate an amount of risk, they may end up benefiting from investing in this way. Particularly if the investor knows something about that market segment.
Fixed Income Funds – fixed income mutual funds tend to be less volatile. This is the right fund for an investor who is looking for income. Fixed mutual funds for the most part are made up of bonds, CD’s and money market funds. Yes, they do fluctuate with interest rates, still are a sound investment for someone looking for an income generating portforlio.
Hybrid Funds – Hybrid mutual funds are generally made up of different investment sectors in one mutual fund. For example, a usual mix may be the pairing of equities with bonds or blue chip stocks with riskier ones.
Index Funds – Index mutual funds imitate the selections and amounts of specified market indexes like the S&P 500. They are generally unmanaged keeping costs down.
Enhanced Index Funds – Enhanced index funds are actively managed funds applying a portion of their resources to outperform their benchmark indces.
Asset Allocation Funds – Asset allocation funds target investors who want a single product solution. They are designed to invest across the primary asset classes including equities, fixed income securities and money market. Each fund is allocated among different asset classes according to their risk tolerances.
Conservative Allocation Funds – Conservative allocation mutual funds are usually for
investors with a minimum five-year investment timeframe.
####What is the difference between shares and mutual funds?
A share is a unit of ownership of a company that is issued by the company to raise finance to enable it to extend its scope or fund other growth related initiatives. A shareholder is a part owner of the company who can influence decisions related to new business ventures and the like and also receives a share of the profits generated known as dividends. Mutual funds on the other hand are investment opportunities offered by a finance institution which may be in the form of shares, bonds and other forms of securities that are then reinvested in other ventures with the institution taking care of the entire transactions. The essential difference between the two is that a share has the advantage of the holder discerning market trends with respect to the specific company while in a mutual fund the investor often cannot determine the exact channels of return on investment which is the domain of the portfolio manager in charge of the mutual fund. However unlike shares where often the individual has to handle the entire financial element which may not be his domain in a mutual fund one’s money is taken care of professionally. Also since mutual funds typically invest in different sections of the economy the risk factor in case the investment fails, is spread out as compared to shares; also mutual funds are easier to liquidate than shares owing to the nature of investment. Mutual funds with respect to their working are a better option as compared to investing in stocks, being affordable as also all inclusive in nature. However both shares as well as mutual funds require the holder to pay charges like transaction fees in case of shares and annual fees in case of a mutual fund as well as the payment of taxes by the beneficiary.
In financial market all that investing people are not experts on analysing any corporate entity for their promoters track record or capabilities. Their is always people who are expert in getting information on any company their promoters and their scope in future. The rs type of experts put in charge for the total dealings as purchase and sale of shares from market or from public issues. And these companies are called mutual funds.
The difference is nothing but these mutual funds are taking care of anal sing and investing on behalf of the members who are invested. And these investors has no right what so ever on Thieu investments in the fund till the date of maturity.
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