How Mutual Funds Work

Would you rather buy a cake from an expert baker or make
one from scratch? This is the sort of self-assessment you do
when you choose whether to buy a mutual fund.
Mutual funds are ready-to-serve portfolios that contain a mix
of stocks or bonds selected by a fund manager on behalf of a
group of investors. These funds provide immediate investment
diversification that you may not otherwise be able to
afford. As always, convenience comes at a price — a variety
of mutual fund fees. You also have lots of disclosures and performance
data to evaluate. Fortunately, getting information
about mutual funds is easy on the Web.

Learning mutual fund basics on the Web

Do you need to start with the basics when it comes to mutual
funds? If so, you can visit a Web site dedicated to educating
mutual fund novices.
The Investment Company Institute is a trade group for the
mutual fund industry. The ICI has a financial interest in
making sure consumers understand enough about mutual
funds to feel comfortable buying them. To this end, it maintains
a fact-filled Web site located at www.ici.org.

Reviewing a copy of the fund prospectus
Mutual funds are legally required to tell all when it comes to
n Past performance of a fund
Used with permission of the Investment Company Institute (www.ici.com)
n The stocks, bonds, and other assets the fund holds
n Any fees associated with the fund
The document that reveals all of this information is called a
prospectus.