When we talk about fund management, we also need to give a thought to what the different types of funds are. Different companies and fund managers manage and control different types of funds and the strategies, theories, and approaches that are used in managing and controlling them are all the same, the ones that are discussed as the basic ones for fund management. Let`s now take a look at what these different types of funds are and what their major objectives are:
- Mutual funds– this is probably the best and the most commonly used funds for making investments in stocks and securities. Another reason for their popularity is because they are easy and simple to operate and hence it is probably the ideal option for investments in stocks, commodities, and securities. So this is an easy mode for anyone to make investments in the financial market to meet the financial goals. Here there are also possibilities for diversified investments in assets and securities thus making it easy for the company to offset the losses experienced in one or the other securities.
- Exchange traded funds – this is very similar to the index mutual funds because it is based on the index and tracks the movements and indexes of assets and commodities that are traded in the market. But they are actually different from the mutual funds and can be easily traded like the shares and bonds that are bought and sold on a regular basis. So these funds can be bought for less, sell for more, held for a particular period of time expecting an increase in the prices for earning more when sold.
- Closed-end funds – these are generally offered by companies at the initial public offering. Here the numbers of shares offered to the investors are restricted to a limited number, unlike the open-end funds where there are shares or commodities offered to the investors regularly without any restrictions. These limited numbers of shares may be sold at a higher or lower value leading to either a premium or a discount.
Though we have these many numbers and types of funds, their core objectives remain the same. It is only the other additional features like growth, income, capital preserving etc that differ from one fund to the other. So before a trader or an investor makes a move here regarding the mutual fund selection, he needs to first know the right one for meeting his objectives.