| Mutual fund performance depends a great deal on | | | | can compensate for the losses. Mutual fund |
| the fund manager. If an experienced and expert | | | | holdings are in the form of units, and their price in |
| manager manages the fund, it will certainly | | | | the market is called the net asset value, or NAV. |
| perform well. The role of a manager is very | | | | When an investor purchases a mutual fund, he or |
| important since the investment strategies are | | | | she receives a certain number of units in the fund. |
| designed by him. The manager needs to prepare | | | | The number of units will always remain the same; |
| for contingencies and unforeseen market | | | | however, the NAV may fluctuate according to |
| fluctuations. In recessionary times like this, it is | | | | the mutual fund performance and market |
| very crucial to invest strategically. Thorough | | | | conditions. Mutual funds are subject to market |
| analysis and research are required on the part of | | | | risk, but the risk is less than for other openly |
| the manager. The manager is paid fees, which are | | | | traded financial instruments. They are loaded with |
| a certain percentage of the total net asset value | | | | several beneficial features like liquidity, economies |
| of the fund. The manager's earnings are directly | | | | of scale, professional management and |
| proportional to the mutual fund performance. A | | | | diversification of investment, among others. |
| manager is expected to have expert knowledge | | | | A mutual funds house operates and manages the |
| and credentials for his past performance. It is a | | | | fund. Each fund house will have different types of |
| very responsible position and requires a complete | | | | funds, and you can choose the one that best |
| understanding of the stock and other financial | | | | suits your needs. There are three broad |
| markets. Typically, a mutual fund invests in | | | | categories of funds: open-ended funds, |
| stocks, bonds, money market instruments, | | | | close-ended funds and unit investment trusts. |
| government securities and so on. Thus, it is | | | | Open-ended funds are usually equity-oriented and |
| imperative that the manager has knowledge | | | | a little risky as compared to close-ended funds. |
| about all the financial markets. | | | | Depending on your risk appetite, you can choose |
| How Does A Mutual Funds Work? | | | | a fund for investment purposes. Age, too, plays |
| A mutual fund is a plan wherein money is pooled | | | | an important role in deciding the risk factor. If you |
| from several investors and invested in various | | | | are in your twenties or thirties, then a high risk |
| financial markets. The money is not placed in one | | | | high return fund may be suitable. However, if you |
| company but rather is diversified into different | | | | are in an age group of forty plus, then a low risk |
| financial markets. This diversification helps in | | | | moderate return fund will suit your needs. |
| reducing the risk of losses. The risk is spread | | | | Whatever type of fund you choose, it is the |
| across different companies, so even if one | | | | mutual fund performance that will decide your |
| company fails to perform, there are others that | | | | earnings. |