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Mutual Fund
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   What is Mutual Fund ?

   » A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a        mutual fund as a company that brings together a group of people and invests their money        in stocks, bonds, and other securities. Each investor owns shares, which represent a portion        of  the holdings of the fund.

   » You can make money from a mutual fund in three ways:
    1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly         all of the income it receives over the year to fund owners in the form of a distribution.

    2) If the fund sells securities hat have increased in price, the fund has a capital gain. Most         funds also pass on these gains to investors in a distribution.
    3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares         increase in price. You can then sell your mutual fund shares for a profit.
       Funds will also usually give you a choice either to receive a cheque for distributions or to        reinvest the earnings and get more shares.

   » Advantages of Mutual Funds:

    1) Professional Management - The primary advantage of funds (at least theoretically) is the         professional management of your money. Investors purchase funds because they do not         have the time or the expertise to manage their own portfolios. A mutual fund is a relatively         inexpensive way for a small investor to get a full-time manager to make and monitor         investments.
    2) Diversification - By owning shares in a mutual fund instead of owning individual stocks or         bonds,your risk is spread out. The idea behind diversification is to invest in a large number         of assets so that a loss in any particular investment is minimized by gains in others. In         other words, the more stocks and bonds you own, the less any one of them can hurt you         (think about Enron). Large mutual funds typically own hundreds of different stocks in many         different industries. It wouldn't be possible for an investor to build this kind of a portfolio         with a small amount of money.
    3) Economies of Scale-Because a mutual fund buys and sells large amounts of securities at a         time,itstransaction costs are lower than what an individual would pay for securities transaction     4) Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares         be converted into cash at any time.
    5) Simplicity - Buying a mutual fund is easy! Individual just has to fulfill some formalities to         invest in mutual fund.With minimum amount of Rs.500 can be invested on a monthly



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