Mutual funds are one of many ways for investing money in
stock market. With a mutual fund you are actually investing in a lot of
companies while only putting your money in to one thing. It is best referred to
as a money pool.
The best source of information about any mutual fund is its
prospectus - a disclosure document that contains all of the important facts
about the fund, its management, the securities it holds, its investment
objectives, risk profile, and fees.
A mutual fund is a pool of money that is managed on behalf of
investors by a professional money manager. The manager uses the money to buy
stocks, bonds or other securities according to specific investment objectives
that have been established for the fund.
Individual retail investors interested in the money market
are limited to money market mutual funds, which don't need initial outlays of
tens or even hundreds of thousands of dollars since money market instruments
such as Treasury bills (T-bills) and certificates of deposit (CDs) require
initial investments that only the wealthiest of investors can undertake.
A bond is similar to a certificate of deposit (CD). With a
five-year CD, for example, a bank agrees to pay you a set interest rate, say, 6
percent. If all goes according to plan, at the end of five years of earning the
6 percent annual interest, you get back the principal that you originally
invested.
