Mutual funds account for an estimated total global combined assets of $26 trillion. So obviously mutual funds are important, but you may be wondering what is a mutual fund?
A mutual fund is a collective investment where a fund manager will invest money from multiple investors. The fund manager selects which securities to invest the money in, hoping for the best returns on the investments. Investors in mutual funds purchase shares in that fund, so the overall performance of the fund directly effects the investors. If a mutual fund does poorly the investor’s shares will decrease in value, and conversely if the fund does well, the investor is rewarded with a higher return on his initial investment. Mutual funds are considered a relatively safer investment compared to stocks and alternative investments.
For those who prefer a video, here is a good explanation of mutual funds:
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