Open-End Mutual Fund

A mutual fund is simply an open-ended professionally managed investment fund which pools cash from a number of investors to buy certain securities in the stock market. Mutual funds are often “the largest percentage of overall equity of U.S. businesses.” Mutual funds most often are institutional or retail in nature. Because a large number of investors to pool money and then invest their dividends, mutual funds generally pay out well even if the market doesn’t perform as well as hoped. Investors who are familiar with the process will be able to pick up on signals that the market may begin to decline, thus causing the shares of the fund they own to drop in price. This tendency is what is known as a “fundamental” change.

One of the benefits of investing in a mutual fund rather than in individual stocks or bonds is that it tends to diversify the portfolio, or portfolio of available assets. By spreading the holdings among many different securities, the investor is able to reduce his risk of loss by investing in different areas. For example, if a particular security drops in value, all of the stocks or bonds that are invested in that security will suffer in value, but if all of the securities are invested in bonds, there would be less overall impact on the value of the portfolio overall.

Mutual funds can be purchased through a variety of avenues. They can be purchased directly from brokerage firms, though they tend to be more expensive than actively managed investments. Alternatively, investors can go through a managed investment fund. These managed funds tend to offer slightly better performance than direct managed funds because they are not under the same pressures that the direct managed funds experience, but they still offer excellent returns if properly managed. Finally, individuals can also open a new open-end investment fund, such as a preferred or marketable equity mutual fund.