TET 2 ANE SENIOR CLEAR NI EXAM ALAG ALAG DIVASE LEVASHE NEWS REPORT
A mutual fund is an investment vehicle made up of a pool of funds
collected from many investors for the purpose of investing in securities
such as stocks, bonds, money market instruments and similar assets.
Mutual funds are operated by money managers, who invest the fund's
capital and attempt to produce capital gains and income for the fund's
investors. A mutual fund's portfolio is structured and maintained to
match the investment.No matter what type of investor you are, there is
bound to be a mutual fund that fits your taste.It's important to
understand that each mutual fund has different risk and reward profiles.
In general, the higher the potential return, the higher the risk of
potential loss. Although some funds are less risky than others, all
funds have some level of risk – it's never possible to diversify away
all risk – even with so-called money market funds. This is a fact for
all investments. Each mutual fund has a predetermined investment
objective that tailors the fund's assets, regions of investments and
investment strategies.At the most basic level, there are three flavors
of mutual funds: those that invest in stocks (equity funds), those that
invest in bonds (fixed-income funds), those that invest in both stocks
and bonds (balanced funds), and those that seek the risk-free rate
(money market funds). Most mutual funds are variations on the theme of
these three asset classes.Let's go over some of the many different
flavors of funds. We'll start with the safest and then work through to
the more risky.
Income funds are named for their purpose: to provide current income on a steady basis. These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity in order to provide interest streams. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cash flow to investors. As such, the audience for these funds consists of conservative investors and retirees. Because they produce regular income, tax conscious investors may want to avoid these funds.
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The money market consists of safe (risk-free) short-term debt
instruments, mostly government Treasury bills. This is a safe place to
park your money. You won't get substantial returns, but you won't have
to worry about losing your principal. A typical return is a little more
than the amount you would earn in a regular checking or savings account
and a little less than the average certificate of deposit (CD). While
money market funds invest in ultra-safe assets, during the 2008
financial crisis, some money market funds did experience losses after
the share price of these funds, typically pegged at $1, fell below that
level and broke the buck.
Income funds are named for their purpose: to provide current income on a steady basis. These funds invest primarily in government and high-quality corporate debt, holding these bonds until maturity in order to provide interest streams. While fund holdings may appreciate in value, the primary objective of these funds is to provide a steady cash flow to investors. As such, the audience for these funds consists of conservative investors and retirees. Because they produce regular income, tax conscious investors may want to avoid these funds.
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