What is a Mutual Fund?

Value Funds

Only invest in stocks that are believed to be undervalued.

What's in a mutual fund?

The fund manager decides which stocks and securities to include in the fund. Some funds include more than 100 different securities.

Mutual Fund

A collection of stocks, bonds, and other securities owned by a group of investors. It is managed by an investment firm. The firm collects, pools, and invests money from investors.

Index

An imaginary portfolio of securities representing a particular market.

Index Funds

Follow the Dow or S&P 500.

Why invest in a mutual fund?

Mutual funds can fit the needs of wide variety investors. Mutual funds help "diversify" a portfolio.

Diversification

Reducing risk by combining different investments whose prices aren't likely to move in step with one another.

Open-end funds

Shares are bought and sold directly with the investment firm managing the fund. Shares are for sale until the fund grows to be too big to be managed effectively.

Closed-end funds

Shares are traded on a stock exchange like ordinary stock. AKA exchange-traded funds.

Mutual fund tidbits

Shares in a mutual fund CANNOT be bought on margin or sold short. The largest family of mutual funds is Fidelity Investments with nearly $1 trillion invested in 315 funds.