What is a Mutual Fund?

A Mutual Fund is a simplified way to invest in the capital market.

With a Mutual Fund, investors simply need to purchase investment packages that contain a selection of shares, bonds and money market instruments all at once

A Mutual Fund is an investment programme that pools funds from a number of investors to invest in financial instruments such as shares, bonds and money market instruments. Mutual Fund investment is an excellent option for investors who do not have the time, knowledge or experience required to invest directly in the capital market. In short, a Mutual Fund is a simplified way to invest in the capital market. Investors simply need to purchase investment packages (known as Units) provided by an Investment Manager. These investment packages contain various shares, bonds and money market instruments that have already been analysed for growth potential and risk by the Investment Manager. This approach is ideal for beginner investors who are unsure how to select shares.

what-is-a-mutual-fund

Investors can hold Mutual Fund products across various asset classes according to their needs, objectives and risk tolerance. Affordable investment capital is also an advantage of Mutual Fund investment, as investors can invest in a range of financial instruments without having to pay large costs.

Mutual Funds can be managed actively by an Investment Manager or managed passively based on an index or sector. Mutual Funds are generally well-diversified—by investing across various sectors—and can effectively reduce potential losses.

Why were Mutual Funds created?

Mutual Funds were originally created around 1770 following a financial crisis in Europe. To help rescue the European economy, a Dutch entrepreneur named Adriaan van Ketwich decided to pool funds from investors to invest in the plantation sector. This was the beginning of the Mutual Fund concept as we know it today.

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