Mutual Fund Basics

A mutual fund is an investment that allows a group of investors to pool their money and hire a portfolio manager. The manager invests this money (the fund’s assets) in stocks, bonds or other investment securities (or a combination of stocks, bonds and securities). The fund manager then continues to buy and sell stocks and securities according to the style dictated by the fund’s prospectus.

There are both pros of mutual funds and cons of mutual funds. Let’s take a look at a few of the pros of mutual funds and what they may offer the novice and experienced investor alike.

There are truths about mutual funds and there are myths about mutual funds. Learn more about both the truths and the myths of mutual funds.

Technically, mutual funds are “open-end” funds -- one of four types of investment companies. Closed-end funds, exchange-traded funds and unit investment trusts are the three other types. In order to understand the structure of mutual funds, it is helpful to compare other “40 Act Funds” – industry jargon for investment companies registered under the Investment Company Act of 1940.

There are many reasons to buy a mutual fund. While there are a plethora of investment options (individual stocks, ETFs and close-end funds, to name a few) a mutual fund can offer a simple, efficient way to invest for retirement, education or other financial goals.

Mutual fund blogs and other investment blogs can be excellent resources to learn about investing. Here are blogs about mutual funds and other investment topics submitted by the bloggers themselves. Add your mutual fund or investment blog to the list or take a look at these blogs.

Before you invest, you should do your homework. Will you choose to use mutual funds, closed-end funds, ETFs, and/or individual stocks and bonds? Inevitably, your homework assignment will lead you to articles outlining the disadvantages of mutual funds. But are all of these so-called disadvantages of mutual funds really disadvantages of mutual funds?

Many investors don’t have the resources or the time to buy individual securities such as stocks and bonds. In order to profit from investing in individual securities, an investor not only needs resources and time, but a considerable amount of expertise.

Regulation of mutual funds, compared to other pooled investment options is extensive. Mutual funds must comply with a strict set of rules that are monitored by the Securities and Exchange Commission.

A mutual fund prospectus is to a mutual fund what an owner’s manual is to a car. If you want to learn more about what’s under the hood of your mutual fund, check out the prospectus. The mutual fund prospectus is a valuable tool that contains important information.

There are two main benefits of TIPS bonds. The most unique features of TIPS are that they’re essentially a Treasury (Treasuries dominate the U.S. dollar market for TIPS), and secondly they’re indexed to inflation, so two of the key risks for bond investors -- credit/default risk and inflation risk -- are addressed by these securities.

The brain-child of Wall Street, mutual funds are perhaps the easiest and least stressful way to invest in the market. In fact, more new money has been introduced into funds during the past few years than at any time in history. Before you jump into the pool and select a mutual fund in which to invest, you should know exactly what they are and how they work.

What is a mutual fund? How do mutual funds compare to closed-end funds, exchange-traded funds and other investments? An understanding of the structure, fees and types of mutual funds will help you decide if mutual funds are for you.

The basic idea of how mutual funds work is straightforward. Investors pool their money and hire a portfolio manager to invest in a variety of investment securities.

The Securities and Exchange Commission shows you the most important parts to look at in a fund prospectus. Look at the table that shows fund performance for the past one, five and 10 years before and after taxes.

An article by the Mutual Funds Education Alliance on why investors might want to consider mutual funds.

This article on the US Securities and Exchange Commission's site explains the basics of mutual fund investing -- how mutual funds work, what factors to consider before investing, and how to avoid common pitfalls.

The basic idea of how mutual funds work is straightforward. Investors pool their money and hire a portfolio manager to invest in a variety of investment securities. When an investor buys a mutual fund, their investment dollars are used to purchase new shares of the mutual fund.

Whether you are a beginner or a professional, understanding how bonds and bond mutual funds work can help investors understand other areas of finance and economics, such as stock investing and interest rates, and how they are all interrelated. Learn the basics on bonds and how bond funds work to become a better investor.

The basic idea of how mutual funds work is straightforward. Right? Not necessarily. There is so much information on mutual funds that it may leave one's head spinning. But what is the most confusing issue related to mutual funds? Is it which funds to buy? Is it how to buy a mutual funds? How about the issue of using an advisor to help you build a mutual fund portfolio?

Diversification with mutual funds is more than just putting your eggs into different baskets. Find out how to properly diversify with mutual funds.