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What is a mutual fund investment?

You know what regular investments are stocks, securities, money market instruments, bonds, etc. which grow or diminish in value depending on how the company youve invested in is doing in the market.

Think of a mutual funds as a bus whose driver is a highly educated money-market expert. The driver knows exactly how much to invest and where to invest it, and gives you a heads up.

Everyone on the bus is an investor just like you, who, instead of directly investing in stocks, bonds, etc.

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Has pooled their money and given it to the driver to invest it for them, together.

The different equities, money market instruments and securities the fund will invest in (and the proportion of mutual funds that will be allocated therein) is called an investment portfolio.

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Risk level of mutual funds :

Risk level of mutual funds is represented by a colour code A blue box represents low risk, yellow box indicates medium risk and a brown box meant high risk.

But the Securities Exchange Board of India has recently mandated that all mutual fund offer documents must contain a Riskometer which is a like a cars speed dial.

Its a semi-circular dial thats divided into 5 slices with an arrow to indicate the 4 risk levels low, moderately low, medium, moderately high and high. The arrow points to the risk level of the fund proposed in the document.

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Risk level of mutual funds :

The risk in a mutual funds refers to potential loss you could incur due to the fluctuations in the market over time.

High risk securities have more short-term price movement, which improves the likelihood of a return over longer periods of time, but can be disturbing in the short-term.

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Risk level of mutual funds :

If you have the time for a longer-term investment, the more the risk you can afford to take to increase potential returns.

You can and should diversify your investments depending on how you feel about your ability to tolerate risk the higher the risk, the higher the reward but you can still earn a little less without the constant worry of your investment failing entirely with a low to medium risk Mutual fund.

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For More Info Visit:

http://www.bankbazaar.com/mutual-funds.html