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Mutual Fund - The Most Popular Investment Vehicle

Mutual funds are one of the most popular investment vehicles and there is a good reason for that. Mutual funds require small investments and an investor is able to buy a diverse array of stocks and other financial instruments in just one go.

If you have invested in one or more mutual funds, you can be assured that your portfolio is well diversified. Diversification is of great importance in mutual funds. If one your securities perform badly, you will not lose all your investment. There are other securities in your portfolio to offset the bad one.

Mutual funds are managed by investment professionals who have a lot of experience in analyzing and trading stocks and securities. It is the responsibility of the fund manager to select the securities that a particular mutual fund owns. A mutual fund is made up of stocks, bonds, and / or other financial instruments.

Just like stocks, mutual funds are divided into shares. A fund can own shares of different corporation and these in turn split further so that investors like you and me can invest in mutual funds.

All the shares of a mutual fund have a net asset value. So if the net asset value of a mutual fund is $1 billion then each share of that mutual fund would be worth $10. It is the responsibility of the fund manager to buy and sell shares that the mutual fund owns. However, you can also buy and sell your shares but only at the end of the trading day.

Each mutual fund comes with a prospectus which lists down the types of securities along with the investment objectives and strategies. You should read the prospectus before buying a mutual fund so that you know what you are getting into.

Most mutual funds require a minimum investment of $2,500 and this amount can be waived if you make a commitment to regular monthly investments.

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