 Mutual funds are a type of investment that takes money from many investors and uses it to make investments based on a stated investment objective.  Each shareholder in the mutual fund participates proportionally (based upon the number of shares owned) in the gain or loss of the fund.

 Mutual funds offer investors an affordable way to diversify their investment portfolios.  Mutual funds allow investors the opportunity to have a financial stake in many different types of investments.  These investments include: stocks, bonds, money markets, real estate, commodities, etc…  Individually, an investor may be able to own stock in a few companies, a few bonds, and have money in a money market account. Participation in a mutual fund, however, allows the investor to have much greater exposure to each of these asset classes.

 Most mutual funds are professionally managed by an investment expert known as a portfolio manager.  This individual makes all of the buying and selling decisions for the fund.  There are thousands of different mutual funds in the United States.  This provides investors with many options to help them achieve their investment objectives.

 Mutual Funds can be divided into four basic categories based upon the funds investment objective.  These categories are: 1. Money Market Mutual Funds 2. Stock Mutual Funds 3. Index Funds 4. Bond Mutual Funds 5. Balanced Mutual Funds

 This is the most conservative type of mutual fund.  The goal is to maintain the $1 value of its shares while providing income.  Invests in high-quality, short-term securities such as certificates of deposit, U.S. Treasury Bills, and U.S. Treasury Notes.  MMMF’s are an appropriate place for savings.  These funds have typically offered higher interest rates than bank savings accounts.  Money market mutual funds are not insured by the FDIC.

 Type of fund that invests in stocks.  These funds are also known as equity funds.  There are many different types of stock mutual funds.  Some of the most common include: Large-cap funds, mid-cap funds, small-cap funds, income funds, growth funds, value funds, blend funds, international funds, and sector funds.

 These are mutual funds whose holdings aim to track the performance of a specific stock market index.  The most common index fund tracks the S&P 500. These index funds invest in the exact stocks (and in the same percentages) as those found in the S&P 500.  Index funds also track bonds, real estate, and other types of assets.  These funds are lower cost than other types of funds.

 It is time for us to begin watching a Nightly Business Report Video on Mutual Funds!  With a question sheet of course!  Don’t worry we will continue the PowerPoint during our next class!

 Type of mutual fund that invests in bonds.  There are different types of bond mutual funds.  Typically, bond mutual funds have the objective of providing stable income with minimal risk.

 Short, Intermediate, and Long-Term U.S. Bond Funds  Short, Intermediate, and Long-Term Corporate Bond Funds  Municipal Bond Funds  High-Yield (junk) Bond Funds  We will talk more about bonds and bond funds later in this unit of study.

 These are also known as hybrid funds.  These mutual funds invest in stocks, bonds, and money markets.  These are very diversified mutual funds. The stock portion of the fund provides the potential for capital appreciation, while the bond and money market portion provide income.

 This is a legal document which describes the investment objective of the fund, the manner in which the fund is administered and operated, the fees and other pertinent information.  The prospectus should be read thoroughly before making an investment decision.

 A mutual fund that charges a commission to cover its administrative costs is called a load fund.  A front-end load charges the load when the shares are purchased, while a back-end load charges the load when the shares are sold.  A no-load mutual fund doesn’t charge a purchase or sales commission.