So you probably heard of this before but not certain what it is? Mutual Funds are an investment fund that gathers money from many different investors to purchase different types of securities. These Mutual Funds are always professionally managed. This means that a portfolio manager is in charge of maintaining the investment and making it easier for you, the investor, to just sit back and chill on your investment.

Typically open-ended, meaning when you put your stake in the fund you purchase new shares created from the fund itself instead of buying these shares in the open market from another investor. This gives the opportunity for the fund to grow as new investors or current ones invest more money and purchase more shares to add to the fund along with the appreciation of the assets in the Mutual Fund.

When these new shares are created the portfolio manager invests the money added to the fund in a variety of stocks and bonds. This gives all the investors in the Mutual Fund the ability to have diversification in investments.

But how do you know what investments a particular mutual fund is invested in? You will look at the Prospectus. The Prospectus gives all the information about the Mutual fund, including the fees and charges, minimum amount needed for the fund and past performance of that said Fund.

When choosing a Mutual fund there are 4 types of categories of funds, Money Market Funds, which usually invests in Treasury bills and other short term debt securities. Bond Funds, which invests in bonds and debt-based securities. Stock Funds, which invest in common stocks. Hybrid Funds, which would usually invest in a balance of stocks and bonds.