A mutual fund is a company that pools money from multiple investors and invests it in securities such as stocks, bonds, and short-term debt. The portfolio of the mutual fund is its total holdings. Mutual funds are bought by investors. Each share represents an investor’s stake in the fund and the income generated by it.
Every fund carries some level of risk. You could lose some or all of your money if you invest in mutual funds because the securities held by the fund may lose value. Dividends or interest payments may also fluctuate in response to market conditions.
The fund managers conduct the research on your behalf. They select the securities and keep track of their performance. Mutual funds typically invest in a variety of companies and industries, reducing your risk if one company fails. Most mutual funds are classified into one of four types: money market funds, bond funds, stock funds, or target date funds. Each type has unique characteristics, risks, and rewards.