What Is A Mutual Fund?
A mutual fund is a managed portfolio of investments that investors can purchase shares of.
Mutual fund managers pools money from many investors and invest the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio.
Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.
Mutual funds are most known for offering the following:
- Professional Management
Fund managers do research for you and monitor the performance of the mutual fund. - Diversification
Mutual funds typically invest in a range of companies and industries. This adds instant diversification.
How To Buy And Sell Mutual Funds
Mutual fund shares are typically purchased from the fund directly or through investment professionals like brokers.
Mutual funds price their shares each business day and they typically do so after the major U.S. exchanges close.
The price that investors pay for the mutual fund is the fund’s per share net asset value plus any fees charged.
You can sell the shares back to the mutual fund at any time.
Before Buying A Mutual Fund
- Read The Prospectus
Before buying shares in a mutual fund, read the prospectus carefully. The prospectus contains information about the mutual fund’s investment objectives, risks, performance, and expenses. - Understand The Risks
Understand that you can lose money investing in mutual funds. Mutual funds are not guaranteed or insured by any government agency. - Understand The Fees
All mutual funds have costs and fees that lower your investment returns. Shop around and compare fees.