The money collected from the investors is invested by a fund manager in different types of securities. These could range from shares and debentures to money market instruments depending upon the scheme’s stated objectives.
The income earned through these investments and capital appreciation realized by the scheme are shared by its unit holders in proportion to the units owned by them.
The Board is charged with ensuring that the fund is managed in the best interests of the fund's investors and with hiring the fund manager and other service providers to the fund. The sponsor or fund management company often referred to as the fund manager buys and sells the fund's investments in accordance with the fund's investment objective. Funds that are managed by the same company under the same brand are known as a fund family or fund complex.
Mutual funds may invest in many kinds of securities. The types of securities that a particular fund may invest in are set forth in the fund's prospectus, a legal document which describes the fund's investment objective, investment approach, and permitted investments. The investment objective describes the type of income that the fund seeks. The investment approach describes the criteria that the fund manager uses to select investments for the fund.
A mutual fund's investment portfolio is continually monitored by the fund's portfolio manager or managers.
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