Mutual Funds

A mutual fund is a professionally managed collective investment scheme that pools money [Page 1138]from investors who share the same investment objective to purchase securities. These securities include stocks, bonds, money market investments, or a combination of two or more of these securities. Investment in mutual funds is attractive because they provide a diversification advantage at an affordable price compared with investment in the stock market. Other benefits include convenience, liquidity, and access to professional investment managers who are responsible for investigating and researching the financial markets and selecting a combination of securities to be bought and sold in order to provide investors with returns above the set benchmark returns.

Investment in mutual funds generally provides a relatively lower-risk return profile, hence it appeals to conservative ...