ALL ABOUT MUTUAL FUND 2

HOW MUTUAL FUNDS WORK ? A mutual fund owns a portfolio of investments funded by all the investors who have purchased shares in the fund. So, when an individual buys shares in a mutual fund, they gain part-ownership of all the underlying assets the fund owns. The fund's performance depends on how its collective assets are doing. When these assets increase in value, so does the value of the fund's shares. Conversely, when the assets decrease in value, so does the value of the shares. How Are Earnings Calculated for Mutual Funds? Investors typically earn returns from a mutual fund in three ways: Dividend/interest income: Mutual funds distribute the dividends on stocks and interest on bonds held in its portfolio. Funds often give investors the choice of either receiving a check for distributions or reinvesting earnings for additional shares in the mutual fund. Portfolio distributions: If the fund sells securities that have increased in price, the fund realizes a capital gain, which most funds also pass on to investors in a distribution. Capital gains: When the fund's shares increase in price, you can sell your mutual fund shares for a profit in the market.