Small Business Terms: What Is a Mutual Fund?

by Greg DePersio

0 min read

A mutual fund is an investment offered through an investment company that invests in various assets and securities based on the fund’s stated objectives. The fund pools the assets of multiple investors, and then provides a market for the shares to be bought and redeemed at net asset value.

The advantages of mutual funds include:

*Liquidity – Fund shares may be redeemed at any time.*Small investment requirements – Initial purchases are as low as $500.*Instant diversification – One fund may invest in as many as 100 different companies.*Investment expertise – Fund managers have extensive experience and background in investing.*Automatic reinvestment – Investment returns from capital gains and dividends can be compounded.

Disadvantages include:

*Many mutual funds charge high management fees.*Many mutual funds also charge a front-end sales load.

References & Resources

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