Meaning of Mutual Fund

Before understanding the meaning of mutual funds we have to know about stocks and bonds.
Stocks: The number of stocks held by investors in a public company. IBM, Microsoft, coca cola etc are the part of public companies.

Bonds: It means GOVT or a company borrows money from you and you receive interest for that process. Now your money is bonded with them for a specific period. There are many options to invest bu8t the mutual funds companies invest in stocks & bonds.
Mutual fund means there is financial committee which pools the money &allows the fund manager to invest it in different growing sectors. When we are investing in mutual funds it means we are buying shares of mutual funds & become share holder of the fund. These investments are very easy because you do not have to invest in a specific sector, it is the responsibility of the fund manager, where to invest. That’s why mutual funds are one of the best investments.
Diversification: It means you have to invest in different sectors. By spreading your money in different types of investment the risk factor is reduced. You can buy different stocks; bonds etc, but if you buy a mutual fund it is automatically diversified in a few hours. It is very safe to invest in mutual funds than in stocks.

By Saniya Mehra