all those vocabs like investing and stocks and about how becoming rich b/c of those.
2006-07-13 05:12:42 · 6 answers · asked by deisel 2 in Business & Finance ➔ Investing
Basically in a nutshell it is a safer way to invest your money. Remember less risk means that you may not make a lot of money at first but is also cuts the chance you'll loose everything.
Mutual funds simply means they invest your money in different stocks instead of just one or two. They spread your money out. There are different types of mutual funds but that is generaly speaking what it is.
2006-07-13 05:21:27 · answer #1 · answered by classylady 2 · 0⤊ 0⤋
Suppose you had $100 to invest. There are a few things that you could buy, but you're limited by that $100 buy-in. If you wanted to buy Google stock, currently priced at $408.83, you're out of luck. Can't afford it.
Imagine, then, that you found 999 other people with $100 each. You get together with them, and agree on an approach to investing. As a group, you have $100,000 to invest. This opens a lot of doors. You (collectively) can then buy Google, Microsoft, maybe some Japanese Yen, whatever you feel like.
Your $100 represents only a small portion (1/1000) of the total, but now you can buy nearly any security on the market, and in fact can diversify your holdings and reduce your risk by investing in several different companies. This is a mutual fund: a shared investment where investors pool their money to increase their total buying power, and split gains or losses proportionate to their share of the total investment.
Many mutual funds employ a professional money manager, a person who buys and sells things specifically for that fund. They research stocks, bonds, and other holdings (like real estate or precious metals), and buy or sell as they see fit. In return for their services, they collect a fee, called an "expense ratio." This is usually expressed as a percentage of your investment balance. So suppose your $100 has grown to $120 by the end of the year. If the investment manager gets an expense ratio of 1%, you'll have to pay $1.20 back to the manager. Other mutual funds work entirely by computer; the computer is told to mimic the holdings of some index (like the S&P 500), and never deviate from that path. These funds still have an expense ratio, but it's typically a lot less.
Thing is, there's no guarantee that your investment will do well; you pay the expense ratio whether you gain, lose, or draw. There are numerous other fees out there, so I heartily recommend you read up on mutual funds further (I like The Motley Fool; see link below) before giving anybody your money.
2006-07-13 21:32:24 · answer #2 · answered by Rondo 3 · 1⤊ 0⤋
Mutual funds are a an investment consisting of a bunch of stocks. You invest money in the fund and as the stocks perform better your investment goes up. check out morningstar.com
2006-07-13 12:18:57 · answer #3 · answered by Charm Brown 1 · 0⤊ 0⤋
Mutual funds are a grouping of investments, some high risk, some low risk, that a group of investors pool their money into, and recieve a payment at the end of a specified term (usually 1 year minimum.) Go to agedwards.com for a better explination
2006-07-13 12:18:21 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Get a book. Like Wall Street Journal's Guide to Money and Investing
2006-07-13 12:17:06 · answer #5 · answered by b_connett 1 · 0⤊ 0⤋
mutual funds are for long-term, if your interested in short term, then mutual funds are not for you. but over time, 20 or 40 years your will make alot of money on them.
2006-07-13 14:30:01 · answer #6 · answered by john r 2 · 0⤊ 0⤋