When you are planning to make an investment, understanding what you are buying and why it’s right for your investment needs is a key first step. A mutual fund is a collection of investments, such as stocks, bonds and other funds owned by a group of investors and managed by a professional money manager. The investment objective of the mutual fund determines what types of securities it buys. A mutual fund can focus on specific types of investments. For example, a fund may invest mainly in government bonds, stocks from large companies, or stocks from certain countries. Or, it may invest in a variety of investments.
When you buy a mutual fund, you’re pooling your money along with other investors. You put money into a mutual fund by buying units or shares of the fund. As more people invest, the fund issues new units or shares. The investments in a mutual fund are managed by a portfolio manager. They manage the fund on a day-to-day basis, deciding when to buy and sell investments according to the investment objectives of the fund.
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