Introduction to Mutual Fund or Unit Trust Fund
You could have read the investment idea from my post about the Rule of 72 for Money Management and Financial Planning. And I had introduced how mutual fund (or unit trust fund) that could be a great tool to everyone to achieve financial goals.
What is a “mutual fund”?
A mutual fund is nothing more than a pooled investment that has some form of professional management. The management buys into an investment strategy that is usually determined by the mutual fund itself, via a prospectus. An example of that would be a mutual fund that’s going to invest in high growth stocks. There are a big group of individuals who come in with relatively small amounts of money and regularly re-invested that is pooled in a mutual fund. The professional manager can go out and buy that class of stocks that they’re trying to implement to achieve the expected goal as laid out in the prospectus, with the assumption of spreading the risks in a bundle of stocks.
Let’s view a short introduction about the ideas behind the mutual fund or unit trust fund:
There are also many types of mutual fund available in the market. The name of each mutual fund below is giving us some ideas about the expected objectives to be achieved:
Bond Fund Growth Fund Aggressive Growth Fund Index Fund Sector Fund Asset Allocation Fund Small-Cap Fund Large-Cap Fund Ethical Fund Emerging Market Fund Foreign Fund REIT Fund
In Malaysia, the mutual fund or unit trust fund is always being monitored by Central Bank (or Bank Negara), with strict rules and regulatory to safeguard all the money contributed from each and every investor. Investors are strong advised to define the goal and objective of investment in mutual fund or unit trust fund, in addition, to understand the objectives of the fund and the risk versus return.
I shall give more information of the types of mutual fund or unit trust fund and more sharing in the next post.
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