Stock Market Learning Blog


Friday, May 15, 2020

what are mutual funds and how it works


            Hi all a very good noon all of you today we are going to discuss about mutual funds, every beginner has to invest in mutual funds because mutual funds are the best platform to learn about the market and are you really want to enter in to the stock market then my suggestion you go to mutual funds then start learning about market without getting losses lets move to the blog post.

what is mutual fund:

the mutual fund is a fund which is  managed by a professional fund manager they allocate your funds in various asset classes, the Mutual fund is a collection of stocks, bonds and various securities, there are many mutual fund companies are there they collected the money from public and put it in various asset classes,they diversify your fund.

if you invest your money in shares you need to work out but there is an equal chance for gains/loss, then you may choose the best mutual funds you have a 90% chance to get profits and dividends for your investments, the professional; fund manager decided and allocate your funds in various securities, if you purchase one share in mutual funds your fund will arrange in all securities arranged in mutual funds.

Difference between shares and mutual funds :

Share: the share is direct purchases yourself by the exchange the all right will have you to buy and sell the shares, you only the responsible person to manage your funds either it may lose or gain

Mutual funds: the mutual fund is managed by the professional expert fund manager, the mutual fund is a basket of investment if you buy a share you owned only one share in the company if you invest in mutual funds you can own the various company shares in some portion.

Major types of mutual funds :

  1. Open-ended funds: open-ended funds are not listed in the stock market, the majority of mutual funds is in open-ended only because the investor has a facility to buy and sell their mutual funds at any time at the current market price it is organised by the mutual fund company
  2. Close-ended funds: close-ended funds are listed in the stock market these funds have a fixed time period to enter and exit in mutual funds, if you want to buy this kind of mutual fund have a specific time period fixed by the stock market if you redeem it in redeem time only.

How it works:

the fund is managed by an experienced fund manager just you invest some money in mutual fund scheme the manager should manage your money in a profitable manner and there are two major benefits make money from mutual funds are

  • capital appreciation: when your mutual funds appreciate you can sell your funds and get good returns from it i.e when you buy a mutual fund after some period your funds will appreciate you can sell it and get benefited
  • dividend payments: for example, if you buy a share then automatically you can get a dividend from it, in same manner mutual funds also give dividend which is owned by your fund, and you may benefit,and some mutual funds don't give dividends so see the terms and conditions carefully then move to the funds

Advantages of mutual funds :

  • Just invest and relax: you just invest your money and relax your money will work for you, because there is no need to worry about diversification and no need to work out the best stocks your fund manager will take cares all the issues
  • Diversification: if you invest in shares you should diversify your portfolio, where there is no need to worry about diversification.
  • Good returns: mutual funds give a decent moderate return to your investment, there is no chance to get losses like in shares the manager will take cares all he things,

Disadvantages of mutual funds:

  • Expense ratio: there is a number of charges in mutual funds like sales fee, managing fee, transaction fee etc..
  • Loss of control: the fund manager will take all rights to buy and sell the securities which are in our portfolio there is no chance to modify our portfolio, you should mind it always you trusted someone to take care of your money, in mutual funds investor always a trustee.

Are you a beginner:

after understanding the whole concept one question will be flowing in your mind which mutual funds are best? there are varieties of mutual funds available in the market you can find it in online according to their ratings and rankings and you can find the best mutual fund which is suitable to your investment period and goals.

and generally, I will give you mutual fund research links you can choose the best one in it

  1. moneycontrol
  3. valueresearchonline

here are. a best mutual funds (source by moneycontrol)

Here is the Axis large-cap fund growth chart...


for my next posts, I will explain how to buy the best mutual funds in the best manner hope you all understand about the mutual funds if you have any doubts about mutual funds feel free to comment below and I will help you to do research (do-it-yourself)

happy investing..........

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