2.
Explanation
Mutual funds are investment vehicles that pool money from multiple investors and use that capital to buy a diversified portfolio of stocks, bonds, or other securities. These funds are managed by professional portfolio managers or investment teams.
1. Diversification: One of the main advantages of mutual funds is diversification. Since they invest in a variety of securities, they spread the risk and provide investors with a way to achieve broad market exposure without having to buy individual stocks or bonds.
2. Liquidity: Mutual fund shares are generally highly liquid, meaning you can buy or sell them on any business day at the net asset value (NAV) price.
3. Professional Management: Experienced fund managers make investment decisions on behalf of the investors. They aim to achieve the fund’s investment objectives and manage the portfolio according to a specific strategy.
4. Variety of Types: Mutual funds come in various categories, including equity funds (investing in stocks), bond funds (investing in bonds), money market funds (investing in short-term, low-risk securities), and hybrid funds (a mix of stocks and bonds).
5. Fees: Mutual funds charge fees and expenses, including management fees, sales loads, and operating expenses. It’s important for investors to understand these costs, as they can impact returns.
6. Net Asset Value (NAV): The NAV represents the per-share value of a mutual fund’s assets minus its liabilities. Mutual fund shares are bought and sold at their NAV price at the end of each trading day.
7. Long-Term Investing: Mutual funds are often considered a long-term investment. Investors typically hold onto their mutual fund shares to achieve their financial goals over time.
8. Regulation: Mutual funds are subject to regulatory oversight in many countries to protect investors’ interests and ensure transparency.