What is a Mutual Fund?

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A mutual fund is a pool of investments managed by an investment firm using a variety of instruments such as stocks, bonds, or government securities. When one purchases shares of a mutual fund, the investment firm (not the individual investor) is responsible for the day-to-day investment activity of the securities within that fund.

There are many funds to choose from.

There are a variety of different types of mutual funds available today, ranging from balanced funds, bond funds, blue chips, small caps, foreign funds, and more. Each mutual fund is very different in its make-up and philosophy, for instance some funds own hundreds of different securities, while others may own only a few dozen.

Mutual fund companies do not guarantee returns and investors need to be aware that there is the potential for negative portfolio or market performance that can lead to the loss of money in mutual fund investments. An investor should look for funds with objectives and risk levels that match those of his/her financial strategy.

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