Understanding Mutual Funds
What Every Investor Needs to Know
A mutual fund is an investment company that pools the financial resources of many investors to buy securities. Investors buy and sell mutual fund shares directly from or back to the fund itself or through a securities dealer. While mutual funds offer advantages, including professional money management, diversification, affordability, and liquidity, investors need to be aware of certain disadvantages:
►Price uncertainty—investors place an order, but share price is determined at the end of the trading day and not in "real time" like shares of stock.
►Lack of control—investors have no input as to how assets in the portfolio are allocated and when securities are bought and sold.
►Cost despite negative return—investors pay sales charges, annual fees and other expenses regardless of the fund's performance.
Also, many mutual funds offer multi-class structures which can affect an investor's performance results. Prior to selecting a certain mutual fund class, investors need to assess their indiviual investment goals and objectives, including how long they intend to stay invested in the mutual fund.
Before you invest, consider these other tips about investing in mutual funds:
Read more about the various types of mutal funds and share class options before you invest.
The information provided on this website is not comprehensive, is not offered as legal or investment advice, and is not a substitute for competent legal or financial counsel. The Securities Division provides this information to give you an overview of the topics discussed. You should not rely on the accuracy of this information, but should carefully review all applicable statutes and regulations with the assistance of legal counsel.