No worries, we are here to make this process joyful and straightforward.
A Mutual Fund is people/investors putting their money together to purchase; stocks, bonds, or other assets. Let’s let that sit in for a few seconds. First, the concept is a pool of money is created to purchase stocks, bonds, or other assets. Where does the money come from?
Investors, (YOU). You got the answer correct. GREAT JOB!!!!
Now that we have this money pulled together, what happens?
Mutual Funds are managed by companies who employ managers to lead the Mutual Fund. The managers are called mutual fund managers or professional money managers. So, every Mutual Fund has a team that the mutual fund manager leads. The manager and the team decide how they will invest the money from the collective.
Before they take investors’ money, they create a plan and goal for their fund. They research and gather all of their information and create a prospectus.
A prospectus is a fancy name for a pamphlet or brochure that gives you information about a specific mutual fund.
What type of information? The name of the mutual fund, what kind of investing the fund will focus on, fees, the minimum amount to get into the fund, the fund’s history, how the fund performed in the market, and the mutual fund manager’s name, and more.
Everything you need to know about a Mutual Fund you will find in the prospectus. The prospectus is a legally binding document; basically, it holds more weight than a pamphlet.
Now that you understand a mutual fund let’s take a quick Quiz
1- What is a mutual fund?
2- Who funds mutual funds?
3- Who manages the mutual fund?
4- What is a prospectus?
5- Should you read a mutual fund prospectus before you invest?
How many did you get right?
A mutual fund is a simple concept once all of the jargon is taken away from it. Do you understand what a mutual fund is?
Some last clarity points, mutual fund can be open or closed.
Open means they are taking new investors.
Closed means they are not taking new investors.
The mutual fund managers make those decisions.
Mutual Fund usually have a minimum amount like $500, $1000, $3000, $10,000 to get into a fund. Here goes a significant TIP: Fidelity Mutual Fund have no minimum; so, you can open up an account with $1; this is the exception, not the norm.
If you are still unsure about what a Mutual Fund is, email me, and I will do my best to help you learn and grow info@FinancialJoySchool.com
YEP, IT’S THAT SIMPLE.
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