Mutual funds are a group investment from multiple shareholders – used to invest in stocks, bonds and other assets. This type of investment allows you to hold shares in high-profile portfolios you may not have been able to afford as an individual investor.
There are several categories of mutual fund, depending on what proportion of risk to return you’re looking for. They allow you to invest in a variety of assets, rather than putting everything into a single investment.
Mutual funds are managed by a fund manager, who decides when and where to invest your money.
The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.
Mutual funds work by paying money to a fund management company, who make investments on your behalf. The company will then combine your funds with those of other investors to invest in multiple assets – based on their expertise, market research and your financial goals.
This lowers your risk of a single investment not working out. Instead, you will hold shares in various mutual funds, known as portfolios.
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Are mutual funds safer than stocks?
Mutual funds tend to carry less risk than investing solely in the stock market. This is because your portfolio will contain a range of assets, rather than a large share in a single company, for example.
Please remember though that the value of all investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.
Can I withdraw money from a mutual fund anytime I like?
Most investments can be withdrawn in part or full at any time. However, you may face a penalty charge and risk receiving less than you originally invested.
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