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Mutual Fund Investing

A mutual fund is a company that pools money from multiple investors and under professional management, the fund invests that pooled money in investment securities such as stocksbonds, short-term money market instruments, other mutual funds, commodities or some combinations of these investments. Investors who contribute to the fund or pool of money, will receive a prorated share of the overall value of the fund. Each share of the mutual fund represents an investor’s proportionate ownership of the fund’s total holdings and the income, or loss, generated by those holdings.

Each fund will have a stated objective which can be found in its prospectus and helps investors understand what types of securities the fund intends to purchase. The mutual fund will also have a fund manager who is responsible to make trades (buys and sells) of the securities held within the fund and they will attempt to do this in accordance with the fund’s investment objectives.

Utah Mutual Fund Investing Comes with Risk

Over the past few decades, American investors have increasingly turned to mutual funds to save for retirement and other financial goals. Mutual funds have allowed investors to take advantage of professional management and trading of securities as well as a diversified mix of investment holdings. However, as with any investment, investing in mutual funds involves risk, including the loss of principal and they have fees that can diminish investor’s rates of return. In addition, with the increased popularity of mutual funds there are now thousands of funds to choose from and this can be difficult for some investors. Some investments such as Exchange Traded Funds (ETF’s) are structured like a Mutual Fund but are not actually considered a Mutual Fund. It is important that investors understand these issues and that they understand both the upsides and the downsides of mutual fund investing and how to choose products that match their goals and risk tolerance.

For more information regarding the basics of mutual funds, how they work, what factors to consider before investing and how to avoid some of the common pitfalls, please read “Mutual Funds, A Guide for Investors”, that was put together by the US Securities and Exchange Commission. You can download this guide by visiting the link below.