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Chapter 17: 23RQ (page 426)

What is a mutual fund?

Short Answer

Expert verified

It is a well-managed financial tool in which investors invest their money and the fund manages their money.

Step by step solution

01

Concept introduction

A mutual fund is a collection of money from many different investors.

02

Explanation of solution

A mutual fund is a professionally managed investment vehicle that takes money from clients, invests it on their behalf, and charges a nominal fee in exchange. It is issued by a number of companies that are experts in the field of investment. This sort of investing is suitable for those who want to invest their money but lack market understanding. The fund gathers funds from all investors and invests them in a variety of asset classes, including debt, equities, and liquid assets. Gains and losses are constantly distributed among investors in proportion to their stake in the company. Investors have the option to sell it at any time.

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