Grade 8 Lesson 3: Types of #investments - #mutualfunds
A #mutual #fund is a kind of #investment that uses #money from #investors to #invest in #stocks, #bonds, or other types of #securities. Investors are people like you and me. They “pool” their money i.e. give it to an expert like a #fundmanager (or "#portfoliomanager") who then decides how to invest the money, where to invest the money and when to invest it. For doing this the fund manager is paid a fee, which comes from the money in the fund i.e. the money you invest or from the returns generated.
A mutual fund can invest in stocks, bonds, and/or any other type of #securities. Mutual Funds allow #investors to buy into many different companies with a single purchase. Investing in a diverse portfolio can make your experience investing a little more steady because you don't have "all your eggs in one basket." It's why mutual funds are popular choices for investing.
There are thousands of different kinds of mutual funds, specializing in investing in different countries, different types of businesses, and different investment styles. Some examples are:
• Funds exclusively investing in stocks or bonds
• Fund exclusively investing in large, mid-sized, or small companies
• Sector-specific funds e.g., funds investing only in #Technology or #Healthcare
• #Countryspecific e.g., funds investing in the securities of a specific country like China or India
• And several more...
Some funds only invest in other funds.
Mutual funds can be bought or sold directly from mutual fund companies, or brokers. If you buy directly from the companies, then usually, you don’t have to pay a #commission. That’s an amount that you pay for brokers to make the #transaction. Or you can pay brokers to do it. Mutual fund investments can be started with a small amount. E.g., in the USA it can be as low as $500. In India, it can be as low as INR 100
There are 3 ways in which you can make money from a Mutual Fund:
• Dividend paid from stocks in your mutual fund portfolio
• Capital appreciation of your mutual fund, driven by an appreciation of securities in your underlying portfolio
• A regular payout from the mutual fund to pay for your expenses, if you have chosen a regular payout fund. Note that this payout will either come from dividends, interests, or capital appreciation of underlying securities
Again, like bonds, there are a lot more details one can study if mutual funds’ is a topic of interest. Our goal here is to introduce you to the concept of mutual funds.
ayu ecosystem #kids #education #financialliteracy #finance