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Mario’s Millennial Monday: What Are Mutual Funds?

What Are Mutual Funds?

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Transcript

When you first start investing it is important to diversify investments. Diversification is a way of investing that splits up your portfolio or foster a wide array of investments. On average diversified investments offer higher returns. Plus Chris if you invest a portion of your holdings in 100 stocks you're much more likely to realize gains rather than relying on one stock to perform well.

A mutual fund is a type of diversified investment that is composed of an array of Stocks crossed all industries. This isn't much less risky way to invest since your money is not concentrated in just one company. If a stock has significant value your losses are limited. Since you also have money invested in other companies mutual funds are actively managed. Which means that before a manager or industry professional. Runs the fund using their expertise in research at a cost of a small percentage or your idealized gains. Rather than speculating on the stock market's path by investing your own money. A money manager would utilize their research and invest your money to help you realize gains.

When considering the price structure of a mutual fund. First consider the net asset value net asset value is calculated by some and together the assets of all the companies in the mutual fund.

Subtracting the liabilities and dividing the difference by the total number of common shares outstanding. The Navy is the price you pay on a per share basis for a stake in the mutual fund. This value changes at the end of each trading day is important to take into consideration when deciding which mutual fund to invest in.