What is a mutual fund anyways an average person may well ask?
A mutual fund is simply a co-operative means by which means many people can pool their savings together and have it professionally managed and as well take advantage of institutional volume discount pricing of purchase and sales commissions.
The concepts of pooling allow investors with relative small amounts of money to access investments that may require larger sums to achieve affordability.
Government and corporate bonds, for example require minimums much higher than the $ 500 or so that most mutual funds will accept as minimum deposits. Additionally, pooling those many small sums gives the fund manager enough capital to broadly diversify the investments within the fund and provide full administrative and accounting services to unit holders.
Every mutual fund is different, not just in it financial objectives but also in the types of investments it may hold. Whether a fund holds stocks, bonds or a combination of the two, will ultimately define the degree or risk associated with each fund.
The differences in the types of securities a fund will hold are determined by the funds...
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