A mutual fund is basically an organisation or a company that pools investors' money together to create several types of investments, known as the portfolio. Stocks, Shares, different types of bonds and financial market funds are investment types that may build a mutual fund.
Generally, there is a professional investment manager who buys and sells securities for the growth of the fund and thus sees the investment through. Managing funds is the full time job of these professional investment managers. As a mutual fund investor, you become a "shareholder" or a "stakeholder"of the company in which have you invested. As and when the company benefits so do you but if the company runs into losses, then your revenue will also decrease. An investor can reduce the risk by having a collection of assets instead of a single asset. Since all your wealth is just under one asset, the risk involved is very high because the asset can get devalued anytime. If you were to create a portfolio of several assets, this risk is reduced.
The Sales charges added to a mutual fund while buying it, is referred to as the Load. It is basically the commission that you pay. Load charges could be up to approximately nine percent of the selling price and could be either front-end load or back end. The difference being that in the former you are allowed to pay for the Mutual Fund while buying it whereas in the latter you may pay for it while selling it.
Many mutual funds are no-load funds. Yes, that means there is no sales fee charged or any compensation required to be given. The fund is direct-marketed so you can buy it without the help of a salesperson or any other person having an inside knowledge of the market.
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