Difference betweem shares, derivatives & mutual fund

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Anil Kumar Kedia (Querist)

23 June 2008 Kindly let me the difference between shares, derivative and mutual fund in all respect and status.

Thanks.

Anil Kumar Kedia

Shekar

Shekar (Expert)

24 June 2008 In finance a share is a unit of account for various financial instruments including stocks, mutual funds, limited partnerships, Companies..

Whereas a mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities.

- mutual fund gives you diversify your investment, such that risk of loss is reduced.
- stock gives you the focus investment, such that when there an increase in the value, your return will be higher (than mutal fund). However, the risk of loss will be higher

A derivative can be defined as something which
derives its value from an underlying product being a stock, currency, commodity or anything that carries a market price.The market price of a product is subject to fluctuations due to various factors effecting its demand & supply thereby associating itself to various risk factors.
SO, derivative is a by-product of the core product which can be used to hedge, speculate & also undertake arbitrage activities.

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