What Is A Mutual Fund?
“Mutual funds are popular among all income levels.
With a mutual fund, we get a diversified basket of stocks
managed by a pro.”
- Barbara Stanny, author of
Prince Charming Isn’t Coming:
How Women Get Smart About Money
Basically, a mutual fund is an investment held by a bunch
of different people. Investors pool their money together and
entrust it to a professional money manager who buys and sells
securities based on the fund’s objective. A fund may
be comprised of stocks, bonds, cash instruments, or any combination
thereof.
You purchase “shares” in a mutual fund, just as
you would an individual stock. Only a mutual fund is inherently
diversified, holding shares in a greater number of securities
than any single investor is likely to buy on his or her own.
Just as the mutual fund’s shareholders share the costs
of buying securities, they also share in the proceeds from
the fund’s growth.
Mutual Fund Advantages:
- Professional money management that handles day-to-day
decisions.
- Diversification of underlying securities.
- Convenience of not having to research securities or place
trades yourself.
- Liquidity to cash out your investment at any time without
having to find a buyer.
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What
is a Mutual Fund?
