mutual funds are diverse stock holdings which are managed on behalf of the investors who buy into the fund. Mutual funds allow investors to take advantage of a diversified portfolio without the need of investing a large sum of money.
A diversified portfolio carries the advantage of offering protection against the rapid market losses of any particular stock. If stocks lose their value, the effect will be less if they belong to a portfolio that is spread across twenty stocks than if they belong to a portfolio that is consist of a single stock.
Diversification is always a good idea in making investments. The problem for small investors is that usually don’t have enough funds to buy a variety of stocks. Despite their limited funds, small investors benefit from diversification through mutual funds.
Mutual funds, aside from stocks, can be consisted of a variety of holdings that include bonds and money market instruments. Mutual funds are actually the companies and the investors are really the company share buyers. The shares in a mutual fund are either directly bought from the fund itself or indirectly bought from the brokers who represent the fund. Selling them back to the fund is a way of redeeming shares.
There are some funds which are managed by investment professionals who decide on which securities to include in the fund. Non-managed funds are also available. Indexes, such as the Dow Jones Industrial Average, usually serve as the bases for the funds. The funds, which simply duplicate the holdings of the index where they are based on, rise by a percentage that is the same as that of the chosen index. Non-managed funds often perform well and they sometimes perform even better than managed funds.
Mutual funds also carry some downsides. Aside from paying some fees no matter what the performance of the funds is, individual investors also have no say in which securities have to be included in the funds or not. In addition to this, the actual value of a mutual fund share is not as precise as that of the stocks on the stock market.
For small investors, a mutual fund is still considered to be a better choice than either stocks or bonds because they offer the diversity that provides cushion against unpredictable stock market movements. They also provide a greater return than bonds. Mutual funds can also lose value especially in the short term. Short-term investors are better off with bonds that offer a set rate of return.
The three main types of mutual funds are money market funds, bond funds, and stock funds. The type that offers the lowest risk, money market funds consist solely of high quality investments like those which are issued by the US government and blue chip corporations. Although they rarely lose money, money market funds also pay a low rate of return.
The aim of bond funds to produce higher yields than money market funds caused them to carry a correspondingly higher risk. The risks that are associated with bonds, such as company bankruptcy and falling interest rates, are also applicable to bond funds.
The types of funds that carry both the greatest potential for profitable investment and the greatest risk for losses are stock funds. The risk in stock funds is mostly for short-term mutual fund holders because stocks have traditionally outperformed other investment instruments in the long run.
There are different types of stock funds including ‘growth funds’ that attempt to maximize capital gain and ‘income funds’ that concentrate on stocks that pay regular dividends.
Those with limited funds or investment experiences are recommended to invest on mutual funds. When choosing the right fund, investors have to consider how much risk they are willing to take against their expected investment returns.
Thursday, 11 November 2010
Stock Market Terms
B - Bad Delivery, Balance of Trade,Bear Cycle Bear Hammering, Bear Market, BSE Sensitive Index or SENSEX, Bullion, Buy and Hold Strategy, ........more
C - Call Money, Call Option,Capital Adequacy Norms, Capital Asset Pricing Model, Capital Market, Commodity, Correction, Cost-Benefit Analysis, CRISIL, Cum-Dividend (CD), Currency Options, Current Value Accounting (CVA), Cushion Theory ........more
D - Daily Margin,Debentures, Debt–Equity ratio, Dematerialization of Scripts (Demat), Derivative,Dow Jones Composite Average, Dow Jones Industrial Average, Dow Theory, .....more
E - Earnings Yield, Economic Indicators, Efficient Market Hypothesis, Eligible Securities, Employee Buyout, Employee Participation, EPS or Earning Per Share, Equity Shareholders, Euro, Eurobond, Eurocurrency, Eurodollar, European Community, ..... more
F - Financial institution, Fixed Income Investments, Floating Stock,Floor Trader, Forward Trading, Forward Delivery, Forward Shares, Fully Paid Share Capital, Fundamental Analysis, Futures, Futures Contract, Futures Market. .....more
G -General Agreement on Tariffs and Trade, Geared Investment Trust, Glamour Shares, Gold Certificates, Golden Handcuffs, Good Delivery,,Graham and Dodd Strategy of Investment, Growth Shares, Glamour Issue. .....more
H - Havala or Hawala (also, Making Up Price) ,Hedging Against Inflation, Hemline Theory, Holding Period Return (HPR), Homemade Portfolio of Portfolios, Home Run, Horizontal Integration, Horizontal Price Movement, Hot Issue, Hot Money, House Rules, Hype .....more
I - IBRD, Imbalance of Orders, Income Shares, Income Tax Rebate, Index, Index Fund, Index Futures, Indexation, Indian Stock Exchanges, Industrials, Inefficient Market, Insider Trading, Insolvency, Institutional Investor, Intangible Assets, Interbank Market, Interest Rate Risk, International Finance Corporation, International Monetary Fund,Inventory Turnover, Inverted Yield Curve, Investment Analyst, Investment Club, Investment Company, Investment Company Shares (Close – Ended), Investment Company Shares (Open – Ended), Investment Horizon, Investment Letter, Investment Trust, Investor Protection, IPO, Irredeemable Debentures, Issue Price. .....more
J - Jobber or Taravaniwallah, Joint Holders, Joint Venture, Junk Bond. .....more
K - Key Indicators, Khoka, Kicker, Know Your Customer. .....more
L - Lady Macbeth Strategy, Laundering Money, Leading, conomic Indicators, Learning Lags,Leasing, Letter of Renunciation, Leverage, Liability, LIFO or Last In First Out, Limit Order, Limited Company, Limited Liability, Liquidation, Liquidation Payments, Liquidity, Liquidity Ratios, Listed Company, Listed Shares, Load, Load Fund, Loan Capital, Loan Syndication, Locked In, Locked–In Trade, Locked Market, Long Bonds or Long – Dated Bonds, Long Buy, Long Coupon, Long Position, Long Term, LSE. .....c
M - Macroeconomic Forecasts, Majority Shareholder , Make a Market, Making – up Price, Managed Fund, Managed Portfolio, Management Audit, Management Buy – in, Management Buy – out (MBO), Margin Account, Margin Buying, Margin Call, Market Capitalization, Market Indices, Market Lot, Market Price, Market Risk, Market Share, Market Tone, Marketable Securities, Master shares, Match – making, Mega Issue, Merchant Bank, Merger, Microeconomics Analysis, Minimum Lending Rate, Minority Interest, Modern Portfolio Theory, Momentum Indicator, Money at Call and Short Notice, Money Market, Mutual Fund, Money Supply, Moving Average, Multinationals, Murphy’s Law, Mutual Funds, Marketable Issues.... .....more
N - Naive Buy – and – Hold Strategy, Naked Option, Naked Position, Narrowing the Spread, National Depository System, National Stock Exchange, NAV, Negative Equity, Negative Net Worth, Negotiable Instrument, Negotiability, New York Stock Exchange, Niche, Nifty, Non – Cumulative Preference Shares, Non – public Information, Non – Voting Shares, Numbered Account.... .....more
O - Odd Lot, Offer by Prospectus, Offer Document, On Stream, Open Economy, Open Offer, Open – End Fund,, Option, Options Contract, Option Holder, Option Money, Option Premium, Option Interest, OTCEI, or Over the Counter Exchange of India, Over the Counter Market of OTC Market, Overvalued Shares. .....more
P - Paid-up Capital, Paid-up Share, Panic Selling, Paper Loss, Paper Profit, Partial Delivery, Par Value, Pathfinder Prospectus, Payout Ratio, P/D Ratio, Penny Shares, Perfect Competition, Performance Stock, P/E Ratio or Price–Earnings Ratio, Pivotal Shares, Point, Portfolio, Portfolio Manager, Pre – acquisition Profit, Predator, Preference Shares, Preferential Allotment, Premium, Premium Issue, Premium Raid, Price Gap, Primary Market, Private Placement, , Prudence Concept, PTI Sto cks can, Public Limited Company, Public Offering, Punter,Put Bonds, Pyramiding, Pyramid Investment. .....more
Q - Qualified Accounts or Report, Qualifying Shares, Quantitative Analysis, Quick Assets Ratio, Quoted Company, Quoted Price, Quoted Shares. .....more
R - Radar Alert, Raider,Ratio Analysis, Ratio Writer,Real Assets, Real Interest, Rate,Recapitalization, Recovery Stock, Refinancing, Regional Stock Exchanges, Registrar of Companies, Reinvestment Plan, Repurchase Agreement, Reserves, Residual Value, Return on Capital Employed or ROCE, Revenue Items, Reverse Merger, Rights Issue, Rising Bottoms,Risk Average,Roll Over, Roll – Over CD, Round Lot, Rubber Cheque .....more
S -Securities and Exchange Board of India (SEBI), Selling Out, Selling Short, Sentiment Indicators, Settlement Date, Shakeout, Share, Share Capital, Share Certificate, Shareholder, Shareholders’ Equity, Shareholders’ Rights, Share Premium, Short Hedge, Spot Delivery, Standard & Poor’s Composite Index, Statutory Liquidity Ratio, Staying Power, Step Discount Bond, Stock Broker, Stock Dividend, Stock Exchange, Stock invest, Stock Option, Stock Splits, Stock Watering, Stop Loss, Stop Order, Switch Order, Swot Analysis, Systematic Risk. .....more
T - Tailgating, Take Delivery, Takeover, Target Price, Tax – Exempt Bonds, Technical Analysis, Technical Correction, Term Discount Bonds, Term Shares, Thin Capitalization, Tiger Markets, Turnkey Project, Turnover, Two – Tier Tender Offer. .....more
U - Unappropriated Profit, Un bundling, Under margined Account, Under subscription, Undervalued Shares, Underwriter, Unissued Share Capital, Unit Trust of India or UTI, Unlisted Share, Unlisted Shares, Valuation of, Unloading, Unmatched Transactions, Unofficial Premium, Unsystematic Risk, Unsecured Debt, Unsecured Debenture, Unrealized Profit or Loss. .....more
V - Value Added, Valuation Reserve, Value Investment, Variability of Return, Venture Capital, Vertical Integration, Vertical Line Charting, V Formation, Volatile, Volatile Shares, Voluntary Liquidation, Voting Shares. .....more
W - Waiting Period, Wallflower Stocks, Wall Street Journal, Warehousing, Wash Sale, Watered Stock, Weak Market, Wedge, Weighted Average, Weighted Ballot, Whipsawed, W Formation, Wholesale Market, Wide Opening, Widow and Orphan Stock, Window Dressing, Wire House, Working Control. .....more
Y - Yield Advantage, Yield Curve, Yield Gap, Yield Spread, Yield to Maturity. .....more
Z - Zero – Coupon Bond, Zero – Rated Debentures, Zurich Axioms. .....more
C - Call Money, Call Option,Capital Adequacy Norms, Capital Asset Pricing Model, Capital Market, Commodity, Correction, Cost-Benefit Analysis, CRISIL, Cum-Dividend (CD), Currency Options, Current Value Accounting (CVA), Cushion Theory ........more
D - Daily Margin,Debentures, Debt–Equity ratio, Dematerialization of Scripts (Demat), Derivative,Dow Jones Composite Average, Dow Jones Industrial Average, Dow Theory, .....more
E - Earnings Yield, Economic Indicators, Efficient Market Hypothesis, Eligible Securities, Employee Buyout, Employee Participation, EPS or Earning Per Share, Equity Shareholders, Euro, Eurobond, Eurocurrency, Eurodollar, European Community, ..... more
F - Financial institution, Fixed Income Investments, Floating Stock,Floor Trader, Forward Trading, Forward Delivery, Forward Shares, Fully Paid Share Capital, Fundamental Analysis, Futures, Futures Contract, Futures Market. .....more
G -General Agreement on Tariffs and Trade, Geared Investment Trust, Glamour Shares, Gold Certificates, Golden Handcuffs, Good Delivery,,Graham and Dodd Strategy of Investment, Growth Shares, Glamour Issue. .....more
H - Havala or Hawala (also, Making Up Price) ,Hedging Against Inflation, Hemline Theory, Holding Period Return (HPR), Homemade Portfolio of Portfolios, Home Run, Horizontal Integration, Horizontal Price Movement, Hot Issue, Hot Money, House Rules, Hype .....more
I - IBRD, Imbalance of Orders, Income Shares, Income Tax Rebate, Index, Index Fund, Index Futures, Indexation, Indian Stock Exchanges, Industrials, Inefficient Market, Insider Trading, Insolvency, Institutional Investor, Intangible Assets, Interbank Market, Interest Rate Risk, International Finance Corporation, International Monetary Fund,Inventory Turnover, Inverted Yield Curve, Investment Analyst, Investment Club, Investment Company, Investment Company Shares (Close – Ended), Investment Company Shares (Open – Ended), Investment Horizon, Investment Letter, Investment Trust, Investor Protection, IPO, Irredeemable Debentures, Issue Price. .....more
J - Jobber or Taravaniwallah, Joint Holders, Joint Venture, Junk Bond. .....more
K - Key Indicators, Khoka, Kicker, Know Your Customer. .....more
L - Lady Macbeth Strategy, Laundering Money, Leading, conomic Indicators, Learning Lags,Leasing, Letter of Renunciation, Leverage, Liability, LIFO or Last In First Out, Limit Order, Limited Company, Limited Liability, Liquidation, Liquidation Payments, Liquidity, Liquidity Ratios, Listed Company, Listed Shares, Load, Load Fund, Loan Capital, Loan Syndication, Locked In, Locked–In Trade, Locked Market, Long Bonds or Long – Dated Bonds, Long Buy, Long Coupon, Long Position, Long Term, LSE. .....c
M - Macroeconomic Forecasts, Majority Shareholder , Make a Market, Making – up Price, Managed Fund, Managed Portfolio, Management Audit, Management Buy – in, Management Buy – out (MBO), Margin Account, Margin Buying, Margin Call, Market Capitalization, Market Indices, Market Lot, Market Price, Market Risk, Market Share, Market Tone, Marketable Securities, Master shares, Match – making, Mega Issue, Merchant Bank, Merger, Microeconomics Analysis, Minimum Lending Rate, Minority Interest, Modern Portfolio Theory, Momentum Indicator, Money at Call and Short Notice, Money Market, Mutual Fund, Money Supply, Moving Average, Multinationals, Murphy’s Law, Mutual Funds, Marketable Issues.... .....more
N - Naive Buy – and – Hold Strategy, Naked Option, Naked Position, Narrowing the Spread, National Depository System, National Stock Exchange, NAV, Negative Equity, Negative Net Worth, Negotiable Instrument, Negotiability, New York Stock Exchange, Niche, Nifty, Non – Cumulative Preference Shares, Non – public Information, Non – Voting Shares, Numbered Account.... .....more
O - Odd Lot, Offer by Prospectus, Offer Document, On Stream, Open Economy, Open Offer, Open – End Fund,, Option, Options Contract, Option Holder, Option Money, Option Premium, Option Interest, OTCEI, or Over the Counter Exchange of India, Over the Counter Market of OTC Market, Overvalued Shares. .....more
P - Paid-up Capital, Paid-up Share, Panic Selling, Paper Loss, Paper Profit, Partial Delivery, Par Value, Pathfinder Prospectus, Payout Ratio, P/D Ratio, Penny Shares, Perfect Competition, Performance Stock, P/E Ratio or Price–Earnings Ratio, Pivotal Shares, Point, Portfolio, Portfolio Manager, Pre – acquisition Profit, Predator, Preference Shares, Preferential Allotment, Premium, Premium Issue, Premium Raid, Price Gap, Primary Market, Private Placement, , Prudence Concept, PTI Sto cks can, Public Limited Company, Public Offering, Punter,Put Bonds, Pyramiding, Pyramid Investment. .....more
Q - Qualified Accounts or Report, Qualifying Shares, Quantitative Analysis, Quick Assets Ratio, Quoted Company, Quoted Price, Quoted Shares. .....more
R - Radar Alert, Raider,Ratio Analysis, Ratio Writer,Real Assets, Real Interest, Rate,Recapitalization, Recovery Stock, Refinancing, Regional Stock Exchanges, Registrar of Companies, Reinvestment Plan, Repurchase Agreement, Reserves, Residual Value, Return on Capital Employed or ROCE, Revenue Items, Reverse Merger, Rights Issue, Rising Bottoms,Risk Average,Roll Over, Roll – Over CD, Round Lot, Rubber Cheque .....more
S -Securities and Exchange Board of India (SEBI), Selling Out, Selling Short, Sentiment Indicators, Settlement Date, Shakeout, Share, Share Capital, Share Certificate, Shareholder, Shareholders’ Equity, Shareholders’ Rights, Share Premium, Short Hedge, Spot Delivery, Standard & Poor’s Composite Index, Statutory Liquidity Ratio, Staying Power, Step Discount Bond, Stock Broker, Stock Dividend, Stock Exchange, Stock invest, Stock Option, Stock Splits, Stock Watering, Stop Loss, Stop Order, Switch Order, Swot Analysis, Systematic Risk. .....more
T - Tailgating, Take Delivery, Takeover, Target Price, Tax – Exempt Bonds, Technical Analysis, Technical Correction, Term Discount Bonds, Term Shares, Thin Capitalization, Tiger Markets, Turnkey Project, Turnover, Two – Tier Tender Offer. .....more
U - Unappropriated Profit, Un bundling, Under margined Account, Under subscription, Undervalued Shares, Underwriter, Unissued Share Capital, Unit Trust of India or UTI, Unlisted Share, Unlisted Shares, Valuation of, Unloading, Unmatched Transactions, Unofficial Premium, Unsystematic Risk, Unsecured Debt, Unsecured Debenture, Unrealized Profit or Loss. .....more
V - Value Added, Valuation Reserve, Value Investment, Variability of Return, Venture Capital, Vertical Integration, Vertical Line Charting, V Formation, Volatile, Volatile Shares, Voluntary Liquidation, Voting Shares. .....more
W - Waiting Period, Wallflower Stocks, Wall Street Journal, Warehousing, Wash Sale, Watered Stock, Weak Market, Wedge, Weighted Average, Weighted Ballot, Whipsawed, W Formation, Wholesale Market, Wide Opening, Widow and Orphan Stock, Window Dressing, Wire House, Working Control. .....more
Y - Yield Advantage, Yield Curve, Yield Gap, Yield Spread, Yield to Maturity. .....more
Z - Zero – Coupon Bond, Zero – Rated Debentures, Zurich Axioms. .....more
Subscribe to:
Comments (Atom)