It seems like there are just as many mutual funds now a days as there are stocks. But what are they? What happens when you put your money into a fund?
Well a mutual fund allows you to invest in how well you think particular management company will perform. Basically your money gets pulled together with many other investors’ money and the fund is responsible for managing it.
The fund hires professionals to decide where your money is best invested. Everyone who invested in a specific mutual fund shares the highs and lows of that fund. So if the fund is making money then you as the individual investor are also making money. If the fund loses money then you as the individual investor also lose money.
The major benefit of this kind of investment is that you do not have to learn how to manage your account and you do not have to worry about the curveballs the market may throw. You simply pick a fund which you believe will do a good job investing your money and then move on.
For this you do have to pay some fees such as a management fee, which can possibly hurt you. But if the company makes a high enough return those fees will be too small to worry about.
The important thing to remember is that mutual funds may be great for some people, but others can do better without them. Some people like me want to actively manage their account; other people need it to be done by professionals. It is really different from person to person.
For more on how do mutual funds work or other information about mutual funds visit http://www.stocks-simplified.com/types_of_mutual_funds.html
When I was young I wanted to learn how to trade the stock market. So I traveled around the country listening to professional traders talk about how they are making money in the market. Now I understand how easy it is to make money in the stock market and started a site http://www.stocks-simplified.com to help others learn.