What is a mutual fund?

POSTED ON 10 JANUARY 2019

What is a mutual fund?

A fund offers investors the opportunity to pool their money with other investors in an investment that is managed by professional investment managers. Funds invest in stocks, bonds or other securities according to each fund’s objective. Investors turn to a fund because of four distinct advantages they may offer over investing in individual securities. These advantages are professional management, diversification, affordability and liquidity.

First, professional management. A fund offers investors access to full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments.

Second, diversification. Buying shares in a fund is an easy way to diversify your investments across many securities, which is just another way of saying that you won’t have all your eggs in one basket. If one investment decreases in value, another investment in the portfolio may increase.

Third, affordability. For many people, it would be more costly to purchase directly all of the individual securities held by a single fund. By contrast, the minimum initial investments for most funds are more affordable.

And finally, liquidity. Most funds typically allow you to sell your fund shares on any Dealing Day, so you have easy access to your money. Of course, the value of shares, when redeemed, may be worth more or less than their original cost.

Funds come in many varieties, designed to meet different investor goals. There are equity funds, bond funds, and even multi-asset funds, which invest in a portfolio of many types of securities. Talk to your financial adviser today to find out if a fund is right for you.

This video is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Any research and analysis contains in this presentation has been procured by Franklin Templeton Investments for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to change. Franklin Templeton Investments accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not an indicator nor a guarantee of future performance.

Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance.

Copyright © 2016 Franklin Templeton Investments. All rights reserved. Issued by Templeton Asset Management Ltd. Registration No. (UEN) 199205211E

Watch the video to find out the basics of investment funds and how they work.

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