Yo wassup guys, welcome to Success Toaster. In this post we will understand what are Mutual Funds and why are they so common.
A MUTUAL FUND is an investment that enables investors to pool their money towards a professionally managed investment portfolio. Mutual funds can invest in stocks, bonds, commodities, cash and/or other assets. These underlying security types called holdings combine to form one mutual fund, also called aportfolio.In simple words, you are outsourcing the work of picking up stocks to a company who’s portfolios have performed well in past.
Mutual funds can be considered as different baskets of investments. Each basket holds dozens of security types, such as stocks or bonds. Therefore, when an investor buys a mutual fund, they are buying a basket of investment securities. However, it is also important to understand that the investor does not actually own the underlying securities but rather a representation of those securities; investors own shares of the mutual fund but not shares of the holdings. This is quite catchy.
For example, if a mutual fund includes Apple stock among its portfolio holdings, the mutual fund investor does not directly own Apple stock. Instead, the mutual fund investor owns shares of the mutual fund.
So, you can trade shares of mutual funds not individual shares. Mutual funds are so common because you can treat mutual fund shares as a individual share itself. They are traded with large volumes in market. So you can easily get in and out. If you are new to stocks or don’t have time for research you should definitely try these funds. Hope this helps.
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