What is a Mutual Fund?

Answer:
A mutual fund is corporation that primarily

owns securities as its assets and allows investors to pool their money to buy and sell stock.

Just like any other corporation, the mutual fund issues shares of stock to a pool of investors in exchange for cash which makes them part-owners of the company.

The cash is used to purchase new securities such as stocks, bonds, short-term money market instruments, and other securities. The holdings of a mutual fund are called the portfolio. Different mutual funds have different investment goals. When you buy a share of a mutual fund, you are buying a share of its portfolio

Instead of buying stocks on a secondary market like the New York Stock Exchange, mutual fund investors buy them from the fund itself or a broker that represents the mutual fund. The price that you pay is the mutual fund’s Net Asset Value plus any sales “load” charges if any.

Mutual fund shares are redeemable meaning you can sell your shares back to the fund. Separate entities called “investment advisors” (who are registered with the SEC) usually manage the investment portfolios of mutual funds.


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