Do you know all there is to know about mutual funds? If you have a 401(k) you probably already own shares in one or more mutual funds. In fact, many long-term investments like college savings plans invest your money in mutual funds. Take this quiz to see what you know about mutual funds.
A mutual fund is a company that pools investors’ money to create an investment portfolio. Mutual funds are made up of many different investments in order to maximize returns
A professional investment manager manages mutual funds. The fund manager buys and sells securities to achieve the most effective growth for investors.
Like any other investment mutual funds can and have suffered losses. However, it is important to remember that catastrophic losses are rare, but your shares will decrease in value proportionately to the losses.
Joining a mutual fund will give the investor diversity in their investment portfolio. Mutual funds by design ensure that your money is invested in a balanced portfolio that is managed by a professional.
Currently there is certification program for professional mutual fund managers. Fund managers are compensated based on fund performance so companies tend to recruit and compensate managers based on performance history.
An open-ended mutual fund is structured so that investors can buy or sell shares in the fund any time they wish. Many people consider all mutual funds as open-ended and put closed-ended funds in another category.
Generally, investors are encouraged to keep their shares in a closed-end mutual fund until the fund closes. However, you are permitted to sell shares in a closed-end fund to investors on the secondary market.
Load charge refers to the price of each share in a mutual fund after a sales charge has been added. A load charge may be assessed as an front-end load or a back-end load depending on when it is charged.
Mutual funds fall into three categories: equity funds made up of only stocks, fixed-income funds made up of fixed return securities like bonds and balanced funds that combine mixed stocks and bonds.
A convenient way to purchase no-load mutual funds is to buy them directly from a mutual fund company. You can find a list of mutual companies on the internet, join by filling out an application, and send it along with the required amount by check.