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A mutual fund company is an investment
company that receives money from investors for the sole purpose to
invest in stocks, bonds, and other securities for the benefit of the
investors. A mutual fund is the portfolio of stocks, bonds, or other
securities that generate profits for the investor, or shareholder of the
mutual fund. A mutual fund allows an investor with less money to
diversify his holdings for greater safety and to benefit from the
expertise of professional fund managers. Mutual funds are generally
safer, but less profitable, than stocks, and riskier, but more
profitable than bonds or bank accounts, although its profit-risk profile
can vary widely, depending on the fund's investment objective.
Most mutual funds are open-end funds,
which sells new shares continuously or buys them back from the
shareholder (redeems them), dealing directly with the investor (no-load
funds) or through broker-dealers, who receive the sales load of a buy or
sell order. The purchase price is the net asset value (NAV) at the end
of the trading day, which is the total assets of the fund minus its
liabilities divided by the number of shares outstanding for that day.