Mutual Funds are investment funds that “pool” money with other investors to invest in things like, Stocks, Bonds, Money Markets that are diversified investments for capital gain.   As with any type of investments there are risks and rewards.  Mutual funds have pros and cons compared to direct investing in individual securities.  As more people invest, the fund increases in units or shares.  Each share represents an investors’ part of the ownership in that fund and the income that it generates.  The combined holdings of mutual funds are called, portfolios.  Investors can sell the shares back to the fund at any time.  The fund must send you the payment within seven days (usually). 

To invest in mutual funds, you can start by opening up an investment account through certain banks and companies that offer brokerage services like, E-Trade, TD Ameritrade, Charles Schwab, Vanguard, etc.  Some companies have a low minimum that you can invest for as low as $25 - $100 dollars.  People invest in companies that involve some form of technology, retail, emerging markets, large cap, or micro-cap, etc.   The ways to earn money when investing in mutual funds are through Dividend Payments, which earn income through dividends on stock or interest on bonds, the fund pays the shareholder all of the income, less expenses; through Capital Gain Distributions, which is when the fund sells security that has increased in price, the fund has capital gain.  At year end, the fund distributes that capital gain, minus any capital losses to investors; and Increased NAV, which is the higher value of the investment.  When investing, it benefits you to work with a company that earns commission and you should also consider whether you need the money immediately or if you can wait to watch your money potentially grow over time.  Do your research before determining if investing in mutual funds will work best for you.  The more volatile (liable to change for the worse rapidly and unexpectedly) a fund is, the higher the investment risk. Mutual funds are used as a good way to contribute to and/or supplement your retirement income.
 

To learn more about mutual funds, watch this You Tube linked here:

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Video Source: YouTube

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By Jason Torrents