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The Wall Street trading floor [Illustrative image] Image Credit: Agency

Dubai: A mutual fund (MF) is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed.

There are many banks which offer active or passive funds based on the risk profile of the clients.

Generally the risk profile depends on the age category that you belong to. The higher the age, investors prefer a less risky fund. People of lower age prefer a little extra risk, which increases the chances of the investor getting higher returns.

How it works?

Mutual funds may include investments in stocks, bonds, options, futures, currencies, treasuries and money market securities. Depending on the stated objective of the fund, each will vary in regard to content and risk. Funds issue and redeem shares on demand at the fund’s NAV, or net asset value.

Many banks like Emirates NBD, First Abu Dhabi Bank have asset management companies which offers funds depending on the risk profile of clients.