Mutual Funds

1.      Mutual Funds

According to www.investopedia.com mutual fund is an investment where different investors pool together their money and hire a manager who will be keeping the portfolio of their investment once they have been invested as bonds, shares or securities.

There are different types of Mutual funds such as :-

Open ended mutual fund, this is where share are issued in or sold back to the fund whenever they are wanted by anyone.

Close ended mutual fund, this is when there is a limit of certain number of shares which can be issue to a particular fund and these number of shares can be sold back only when the fund terminates itself, however this type of mutual fund can sold to other investors through secondary share market.

Equity mutual fund, this is where the mutual fund company invest more than 50% of the total fund in to stock market by either buying shares or stocks. 

Bond fund, this is where the mutual fund company invest the fund in to a range of debt instrument such as municipal bond, corporate bond and convertible bonds.

Money market funds, this is where the mutual fund company invest the fund for the purpose of earning the investors interest from their investments by investing in banks or by purchasing treasury bills.

No loan mutual fund, this is where no fee or commission is charged when buying or redeeming the shares of the mutual funds.

Structured fund, this is when a company invest in a bond which has both combination of fixed income products and equity product in order to give investors the advantage of capital protection and appreciation.

Exchange traded fund, this is an investment vehicles which consist of assets or number of securities and traded in a stock exchange market like normal stocks.

S & P 500 fund, this represents the most widely cited equity benchmark in the United States of America. Investors are advised to follow certain steps when choosing mutual funds since they can invest in mutual funds for at least $100 without any trading cost. First, they should try to avoid sales charge which incurred during buying or selling of the fund since this will reduce their return on investment. Second, they should look for investment with low expense ratio since these ratios represents the annual fees charged on mutual funds and if possible they should look for investment with expense ratio with percentage less than one percent. Third, they should look for investment with low turnover since the longer the fund is held by mutual fund, the lower trading and hence low turnover. Turnover of 50% or less is advised. Next, investors should look for investment with consistency in their returns year after year. Next, investors should look for mutual fund manager who has the longevity with the fund and the company. Last but not least, investors should ask experts such as financial planners, mutual funds companies and investment advisors. Lastly, investors should review regularly the investment by setting up a regular review schedule for the purpose of checking the performance of the fund if it is consistent with the investor’s level of investment risk and investment objectives. Some of the companies/ institutions dealing with mutual funds are LIC Mutual fund, principal mutual fund, HDFC mutual fund, Birla Sun Life mutual fund, Franklin Templeton Investments, SWIP UK equity funds, AXA investment managers and Jupiter growth Funds.