Mutual Funds & How They Work
Mutual funds enable you to pool your money with other individual investors to purchase stocks, bonds or other assets. Together, you share the potential risks, rewards and expenses of whatever investment strategy you choose. Every mutual fund has a professional money manager who is responsible for increasing the fund’s value. Different mutual funds have different objectives, such as growth, income and safety. No matter what your investment goals are – whether saving for an emergency fund, a new home or retirement – mutual funds can be an excellent addition to your financial portfolio.
Fees, Expenses and Risks
Fees and Expenses: As with any business, running a mutual fund involves costs. Funds pass along these costs to investors by charging fees and expenses. Fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you.
No Guarantee: Mutual funds are subject to overall market risks. Mutual funds do not have a guaranteed return and are not FDIC insured and your investment may lose value. Be sure to understand the type of risks involved in any fund you consider.
Prospectus: Before buying shares in a mutual fund, read the prospectus carefully. The prospectus contains information about the mutual fund's investment objectives, risks, performance, fees and expenses.