When you are planning to make an investment, understanding what you are buying and why it’s right for your investment needs is a key first step. A mutual fund is a collection of investments, such as stocks, bonds and other funds owned by a group of investors and managed by a professional money manager. The investment objective of the mutual fund determines what types of securities it buys. A mutual fund can focus on specific types of investments. For example, a fund may invest mainly in government bonds, stocks from large companies, or stocks from certain countries. Or, it may invest in a variety of investments.
When you buy a mutual fund, you’re pooling your money along with other investors. You put money into a mutual fund by buying units or shares of the fund. As more people invest, the fund issues new units or shares. The investments in a mutual fund are managed by a portfolio manager. They manage the fund on a day-to-day basis, deciding when to buy and sell investments according to the investment objectives of the fund.
To learn more about mutual funds, how they work, types of funds, risks of mutual funds and how to buy them, visit GetSmarterAboutMoney.ca.