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80 Million Americans Can’t Be Wrong
More than 80 million people, or one half of the households in America, invest in mutual funds. That means that, in the United States alone, trillions of dollars are invested in mutual funds. So what exactly is a mutual fund anyway?
A mutual fund is a professionally managed investment that pools money from many investors to buy stocks, bonds and/or a combination of other types of investments. Each mutual fund has a fund manager that buys and sells the funds investments in accordance with the funds investment objective. This is the person who makes the decisions about what to invest in and how much, based on the goal of the fund. It’s important to understand the role of the fund manager is to make sure that it operates at a profit. Mutual funds are very accessible through many on-line brokerage firms. Again, the key to investing in any vehicle is research.
There are two types of mutual funds, load and no-load.
A load fund charges you for the shares purchased plus an initial sales fee. This charge is typically anywhere from 4% to 8% of the amount you are investing or it can be a flat fee depending on the mutual fund provider. This is added to your purchase as a sales fee. For example, if you invested $1,000 into a 5% load fund, you would actually be investing only $950 with the remaining $50 going to the company as commission.
A no-load fund simply menas that you can buy and redeem the mutual fund shares at any time without a commission or sales charge.
Nearly every fund company in the country also has its own website. Simply type the name of the fund or fund company that you wish to learn more about into a search engine and hit “search.” If you don’t have a specific fund company already in mind, you can run a search for terms like “no-load small cap fund” or large-cap value fund.”
Also check out these resources for additional information: The Mutual Fund Education Alliance is the not-for-profit trade association of the no-load mutual fund industry. They have a tool for searching for no-load funds. And Morningstar is an investment research firm that is particularly well known for its fund information.