terms, a mutual fund is a company that aggregates money from many
people and invests that money in stocks, bonds, other securities
or assets, or combinations of these investments.
holdings the mutual fund owns are known as its portfolio and each
share represents an investor's proportional ownership of the fund's
total holdings and the income those holdings generate.
million Americans -- or one in two households -- are shareholders
in mutual funds, an industry valued around $7 trillion.
requirements on many funds are low enough to allow even the smallest
investor to become a shareholder. Individuals can purchase mutual
fund shares from the fund itself (usually through a broker for
the fund company), rather than buying shares on a secondary market,
such as the New York Stock Exchange or the NASDAQ Stock Market.
have been around since the 1920s, mutual fund investments have
soared over the past 20 years. Many Americans prefer investing
in mutual funds over individual stocks largely because mutual
funds represent an easy and less costly opportunity for the average
investor to benefit from income preservation, as well as income
and capital growth.
a mutual fund by definition offers portfolio diversification and
money management by industry professionals who research, select
and monitor the performance of the fund in the best interests
of the individual investor -- providing them an opportunity for
financial success that was once available only to the very wealthy.
By Elizabeth Harper, Online NewsHour