top ten mutual funds : What Is A Mutual Fund ?

2008-04-23 16:17:29

( Financial )



Before you find out about top ten mutual funds, top performing mutual funds, or top rated mutual funds – what exactly is a mutual fund? Many investment writers just assume that readers already know what a mutual fund is. But do you really? So first of all find out before you start dealing with complex issues like the top ten mutual funds, which make you a better investor.

Getting started
To have a working definition of a mutual fund you need to have a basic understanding of stocks and bonds. So let’s keep it simple:

Stocks
These represent a public company’s shares of ownership. They are the most commonly traded ownership investment on the financial markets.

Bonds
These give you the opportunity to lend your money out to a company or even the government. After a certain amount of time you will receive your principle back together with your interest. These are the most usual lending investment traded.

These are not the only types of investments. There are also:
- annuities
- precious metals
- real estate.

However most mutual funds invest in stocks/bonds.

Mutual Funds
A mutual fund is, simply speaking, a financial intermediary allowing a group of people to invest their money together having a specific investment objective. Every mutual fund has a fund manager. He is in charge of investing all the money in securities (usually bonds or stocks). So a mutual fund investor buys shares (portions) of the mutual fund becoming a shareholder of the particular fund.

Mutual funds are an excellent investment
- they are extremely cost-efficient
- extremely easy to invest in.

All the decision-making is taken out of your hands and under the control of professionals.

By putting a lot of money together, you, the investors, can buy securities with a significantly lower trading cost – much more so than if you two do so alone.

So now that you know what a mutual fund is, you can find out about the top ten mutual funds.


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