Mutual Funds
A mutual fund is a financial intermediary that allows a group of investors to pool their money with a predetermined investment objective. The pooled money is invested in specific securities (usually stocks or bonds) by a fund manager. By investing in a mutual fund, you are buying shares of that mutual fund and become a shareholder of the fund.
Mutual funds are cost efficient and easy to invest in. By pooling your money in a mutual fund, you can purchase stocks or bonds with much lower trading costs than if you tried to do it on your own. But the biggest advantage of mutual funds is diversification. You spread your money across many different types of investments. When one investment is down another might be up, thus significantly reducing your risk.
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