What are mutual funds?
A mutual fund investment is one of the easiest and least stressful ways to build up an investment portfolio. Basically, a mutual fund is a pool of money put together by investors, companies and specific organizations, for the purpose of investing it and giving each investor a cut of the fund’s profits. There are a few different types of mutual funds, including closed and open-ended and load and no-load.
Closed-end funds have a set number of shares available to the public on the open market. They normally trade at a discount to net asset value. Open-end funds, on the other hand, do not have a set number of shares and will reflect the net asset value of the fund’s underlying investments. Load and no-load shares are different from closed and open-end funds in a few ways. A load is a sales commission where, if a fund charges a load, the investor pays the load on top of the asset value of the fund’s shares. No-load funds, on the other hand, have lower expenses associated with ownership and thus tend to generate higher returns.
Mutual Fund Investment
Since mutual funds tend to be easy to invest in, there are a variety of funds available for new and experienced investors. To narrow the selection down, mutual funds can be categorized into equity, fixed income and money markets. Regardless of the category, a mutual fund investment is generally bought in dollar amounts directly from a mutual fund company, bank or brokerage firm. Furthermore, they will either be load or non-load, though even funds without commissions will still carry internal expenses that you should plan accordingly for.
If you’re interested in mutual fund investment, you should set up a brokerage account that will allow you to purchase shares as you would for stock. Most funds have a minimum investment that ranges from as little as $25 to upwards of $100,000. Mutual fund investment can be carried out over the phone, online or in person if you choose to work with a financial representative or brokerage firm, and all mutual fund investors receive the fund’s closing price on the day the order is placed. As with any type of investing, it pays to understand the market’s current trends and the latest mutual fund news. InvestorPlace offers consistently reliable and up-to-date information you can depend on to make your mutual fund investment choices. Check out the latest news today!