Mutual fund is a collection of stocks, bonds and other securities purchased by a group of investors and managed by a professional investment company. A person with limited funds can buy some units of equity participation and enjoy the benefits of ownership of a variety of effects. Moreover, investors do not bother to analyze the effect.
There are two types of mutual funds, namely the type of company and collective investment. This type of liability is a form of mutual funds in a limited company (PT). In Indonesia are classified into two types, namely mutual funds open and closed mutual funds. Meanwhile, the type of collective investment is a contract between an investment manager and custodian bank representing the legalization of the unit owners or investors. This contract authorizes the investment menajer to manage portfolios of collective investment and custodian bank to act as custodian for collective funds.
There are many benefits that investors invest in mutual funds.
a. Potential rate of return. There are two kinds of rate of return expected by investors, the dividends or interest received from investment managers and capital gains from the increase in net asset value.
b. Diversification. A mutual fund portfolio consists of a variety of effects that can be owned by investors with relatively little cost.
c. Professional management. Investors do not need to analyze the effect because the task has been done by a professional investment manager.
d. Liquidation. Mutual funds are open-type highly liquid because investors can sell his units at any time to the investment manager.
In addition to these benefits, mutual funds can provide a huge potential losses as more vulnerable to risk, except for money market funds. In addition, for a closed mutual fund investors can not sell its investments whenever he wants. This is because the sale of mutual funds should be made on a stock depends on supply and demand is there.