A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
Can mutual funds help create wealth?
Business and commerce allow us to create wealth by investing our money with those who are on the path to wealth creation. We can be investors in enterprises of entrepreneurs, investing in shares of various companies. While entrepreneurs and managers run their businesses efficiently and profitably, shareholders reap the benefits. In this regard, the Common Fund is a great way to build wealth.
But how do we know which stocks to buy and when?
This is where it is important to get professional help. They also take advantage of a large corpus to explore multiple opportunities at once. As a balanced diet, we all need proteins, vitamins, carbohydrates, etc. Eating only one type results in a certain nutrient deficiency. Similarly, in a diversified equity fund you are exposed to different segments of the economy and also protected from the potential downside.
Invest in a professionally managed diversified equity fund and stay invested for a long time to create wealth for yourself and your next generation.