What Is A Mutual Fund

A mutual fund is an investment vehicle where a person or group of persons, called mutual fund managers, choose a group of stocks and sell them in one package. Mutual funds are generally lower risk investments for a beginner or intermediate investor because: • The managers are experts • Having a large number and variety of stocks is less risky than owning one stock • If the price per share of some stocks go down, others can go up, possibly keeping the price (Net Asset Value), of the mutual fund stable or going up. Mutual funds are also recommended for those who do not have the time, energy or desire to research their own stocks. Every mutual fund and fund family comes with a prospectus-READ the prospectus before investing. The prospectus not only helps you to understand what you are investing in, but it helps you to understand mutual funds and stocks in general. A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don't have to figure out which stocks or bonds to buy). If you would like to know the history of mutual funds.Send the queries in the post . By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification.