A mutual fund collects money from investors and invests the money in its name. A small fee is charged for money management.
The mutual fund – Earn the key to the stock market.
Mutual funds are an ideal investment vehicle for regular investors who do not know much about investments. Investors can choose a mutual fund plan according to their financial objective and start investing to achieve the goal.
How to invest:
You can invest directly with a mutual fund or hire the services of a mutual fund adviser. If you are investing directly, you will invest in the direct plan of a mutual fund plan. If you are investing through an advisor or intermediary, you will invest in the plan’s regular plan.
There is also an investment plan better known as SIP, click here to read about it.
If you want to invest directly, you must visit the website of the mutual fund or its authorized branches with the relevant documents. The advantage of investing in a direct plan is that you save on the commission and the money invested would add considerable returns over a long period. The biggest drawback of this method is that you must complete the paperwork, investigate, control your investment … all yourself.
How companies work in the mutual fund:
Mutual funds are virtual companies that buy groups of stocks and / or bonds as recommended by an investment adviser and fund manager. The fund manager is hired by a board of directors and is legally bound to work in the best interest of mutual fund shareholders. Most fund managers also own the fund, although some are not.
Mutual funds are divided into several types of categories, which represent the types of securities in which the mutual fund manager invests.
One of the largest is the fixed income category. A fixed income mutual fund focuses on investments that pay a fixed rate of return, such as government bonds, corporate bonds or other debt instruments. The idea is that the fund’s portfolio generates a large amount of interest income, which can then be transferred to shareholders.
Another group falls under the name of “index funds”. The investment strategy is based on the belief that it is very difficult, and often expensive, to try to constantly win in the market. Then, the fund manager of the index simply buys shares that correspond to an important market index such as the S & P 500 or the Dow Jones industrial average. This strategy requires less research by analysts and advisors, so there are fewer expenses to consume the returns before they are transferred to the shareholders. These funds are often designed with cost-sensitive investors in mind.
If an investor seeks a diversified exposure to the Canadian stock market, he can invest in the S & P / TSX composite index, which is a mutual fund that covers 95% of the Canadian stock market. The index is designed to provide investors with a broad benchmark index that has the liquidity characteristics of a narrower index.
The S & P / TSX Composite Index is composed mainly of the financial, energy and materials sectors of the Canadian stock exchange, with sectoral allocations of 35.54%, 20.15% and 14.16%, respectively. The fund’s performance is recorded as the percentage change in its global adjusted market capitalization.
Balanced funds invest in stocks and bonds with the objective of reducing the risk of exposure to one asset class or another. Another name for this type is “asset allocation fund”. An investor can expect to find the allocation of these funds among the relatively constant asset classes, although it will differ between funds. Although their objective is the appreciation of assets with lower risk, these funds have the same risk and are subject to fluctuations other than the classifications of the funds.