Mutual Funds By: Devin Kuhns
What is a Mutual Fund? • A mutual fund pools money together from thousands of small investors and then its manager buys stocks, bonds or other securities with it. • When you contribute money to a fund, you get a stake in all its investments.
What's the Big Deal? • Since most funds allow you to begin investing with as little as a couple thousand dollars, you can attain a diversified portfolio for much less than you could buying individual stocks and bonds. Plus, you don't have to worry about keeping track of dozens of holdings - that's the fund manager's job.
Types of Mutual Funds • Open-end fund- at the end of every day, the fund issues new shares to investors and buys back shares from investors wishing to leave the fund. • Exchange-traded funds- is an investment fund traded on stock exchanges, much like stocks. • Equity funds- which consist mainly of stock investments, are the most common type of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the United States. Often equity funds focus investments on particular strategies and certain types of issuers.
Mutual Funds vs. Separately Managed Accounts • With mutual funds you don’t risk as much to invest and you will always have a professional looking out for your best interest. • Separately managed accounts (SMA or SMAs) performed better than mutual funds in 22 of 25 categories from 2006 to 2008.
Work Cited • http://en.wikipedia.org/wiki/Mutual_fund • http://www.vanguard.com • http://money.cnn.com/magazines/moneymag/money101/lesson6/