For more information on this refer to the Wikipedia's https://en.wikipedia.org/wiki/Mutual_fund
info.Mutual Fund Primer
A mutual fund pool is an investment fund that is collated by various different investors and then invested into a portfolio that is constructed of various different securities based on what the investors’ request. A mutual fund company is normally known to invest in various different stocks, bonds, and money markets. In order for ownership to be claimed on these assets, the size of the investor’s stake in the fund will be taken into consideration.
An open end company
All mutual funds are open ended companies, legally and this is one of the three kinds of investment companies that are available to investors. The other two types of companies are unit investment trusts (UITs) and the close ended funds. The open ended company is one that is legally able to pool money from various different investors into one particular portfolio of all investments instead of putting each investment in a single portfolio for each investor. When this is done, an investor does not own the actual portfolio, instead they own shares in the portfolio.
When you invest in a mutual fund, you are basically buying shares in the investment portfolio. In mutual funds the pool will continue to grow in order for this particular portfolio to facilitate other investors. However, the mutual funds may opt to stop selling shares if they realize that the pool has gotten too big. As an investor, you have the option of buying and selling your shares through the mutual fund and there is no need to go through a broker or a secondary market.
Advantages of having a mutual fund
Having a mutual fund appears very attractive to some investors based on a variety of reasons. They come very affordable and all investors, no matter their level in the investing scheme. Therefore, as an investor you can find very low prices on the initial and subsequent purchases. These portfolios are also managed by professionals whose job it is to carry out research, choose the right investment for the funds, and to monitor the performance of the portfolio. When you opt to go with a mutual fund, you are also choosing to minimize your risk.
Disadvantages of mutual funds
Although there are numerous benefits to going with investing in a mutual fund, as with every investment markets there are a few drawbacks and the major one is that it has various different cost such as sales charges and annual fees that will be accrued no matter how your funds perform.
When you opt to invest in a mutual fund you can gain wealth as the stocks that you invest in grows. As a Wall Street investor, it is expected that there are some considerable amount of wealth to be gained from investing in a mutual fund.
How do you think about it? Is that true?