What is a mutual fund?

A mutual fund pools the investment dollars of a group of shareholders and is often actively managed by a professional money manager who buys and sells stocks, bonds, or other investments based on the fund's investment objective. Mutual funds take the guesswork out of building a diverse portfolio one asset at a time. They offer a wide variety of asset classes, so odds are if you want broad market exposure or a narrow corner of the market, there are options to choose from.

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What are the benefits of investing in mutual funds?

Depending on your investing goals, mutual funds offer several important features that can make them a good option for investors like you. Here's why they're so popular:


A mutual fund holds a variety of assets (often more than 100 securities from a range of companies), so they are inherently balanced which helps reduce risk.


You can easily redeem shares of a mutual fund at any time. Typically, the fund will buy back your shares at the current price, less any redemption fees.


Buying securities one by one can rack up brokerage fees, but the annual fee of a mutual fund can be low enough to make it a more cost-effective option.

Professional management

Not everyone has the know-how to manage a portfolio. A mutual fund gives you the benefits of ongoing professional money management at a reasonable cost.

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What are the different types of mutual funds?


Stock funds are categorized based on the size of the companies they invest in (small cap, mid cap, or large cap), their investment approach (aggressive, income, value, etc.), and whether they invest in U.S. or foreign equities.


This type of mutual fund invests in corporate, government, or municipal bonds, or other debt instruments with the goal of creating a steady stream of monthly, quarterly, or semi-annual interest income to investors.

Money market

Money market funds invest in instruments such as cash, cash equivalent securities, and high-credit-rating, short-term debt-based securities (e.g., U.S. Treasuries) to offer investors high liquidity with a low level of risk.

Balanced or Hybrid

Also known as asset allocation funds, this type of mutual fund invests in a hybrid of securities including stocks, bonds, money markets, or alternative investments with the goal of reducing the risk of exposure across asset classes.

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