Mutual funds are professionally managed portfolios of stocks, bonds or other securities, owned by a group of investors who have common financial goals. The value of mutual fund shares will fluctuate, so that, when redeemed, they may be worth more or less than their original cost.
For an annual fee, the mutual fund manager invests this large pool of money in many different securities to create a diversified portfolio. A single fund can own dozens or even hundreds of different securities. This level of diversity can be hard to match as an individual investor, which is one reason mutual funds have become such a popular investment choice. A diversified portfolio helps reduce investment risk.
Each mutual fund has a specific investment objective, allowing you to select a fund whose investment objective and risk level is suitable for you and your financial goals. The investment company is responsible for keeping the portfolio in line with the fund's objective, using its expertise to manage the fund for you. You never have to worry about when or what to buy and sell.
The type of securities each mutual fund buys is spelled out in a detailed investment document called a prospectus. This document also discloses the fees and charges of the fund and should be read carefully before investing.
Mutual funds are professionally managed portfolios of stocks, bonds or other securities, owned by a group of investors who have common financial goals. The value of mutual fund shares will fluctuate, so that, when redeemed, they may be worth more or less than their original cost.
