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What is a Mutual Fund? A mutual fund is actually an investment company that holds a large number of different investments. When you invest in a share of a mutual fund you are actually investing in the underlying investment portfolio that particular fund holds. Every mutual fund has a stated objective which briefly describes the fund's investment goals. A typical investment objective or goal for an income oriented fund might be: Current income consistent with preservation of capital. Every mutual fund also has a legal document called a prospectus. This document describes the goal of the fund, the types of investments that the fund may invest in, sales charges, risk disclosures, management and marketing fees, restrictions, and other information. It is wise to carefully review a fund's prospectus before investing in a mutual fund. Mutual funds have many advantages including: Diversified portfolios holding 50 to more than 200 different investments. Professional management by the fund manager(s) so the investor does not have to make buy or sell decisions regarding the fund portfolio. Many funds allow small initial investments. It is easy to make additional investments to many funds. Many funds offer exchange privilages that allow you to switch from one fund to another in that family of funds if your goals, financial situation, or market conditions change. Different mutual funds may hold very different kinds of investments. One fund may be conservative while another may be very aggressive. The kinds of investments that a fund makes determine how risky a fund is. It is important to understand your own investment objectives. Once you have determined what they are you can begin the mutual fund selection process to choose an appropriate fund that will have similar goals to your own.

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