What are Mutual Funds?

Know what are mutual funds all about according to financial and investment experts. Plus, advice in investing in mutual funds from Suze Orman.

This page will give you an idea what are mutual funds and how do they work. Read the meaning and definition of mutual fund so that you will have an idea why they are considered as the best investment vehicle. Maybe you asked what are the types of mutual funds and what are the good ones to invest in. There are many types of mutual funds namely equity fund, bond fund and balanced fund, etc.

What are Mutual Funds According to Suze Orman

According to Suze Orman, mutual funds are investment vehicle that holds dozens, if not hundreds, of individual stocks (or bonds). An actively managed mutual fund employs a manager (or managers) to decide which investments the fund will buy, sell and hold. ⁽¹⁾

Suze Orman Advice: A mutual fund is the smartest investment when you have limited money. With one investment, you get the great diversification of owning a share of many different firms; that protects you if any one company craters. ⁽¹⁾

Meaning of Mutual Funds According to Brian O’Connell

Mutual funds are investment companies whose job is to handle their investors’ money by reinvesting it into stocks, bonds, or a combination of both. Because mutual funds are divided into shares and can be bought like stocks, they have high liquidity. Mutual funds are convenient, particularly for small investors, because they diversify an individual’s monies among a number of investments. Investors share in the profits of a mutual fund, and mutual fund shares can be sold back to the company on any business day at the net asset value price. Mutual funds may or may not have a load, or free; however, funds with a load will provide advice from a specialist, which may help the investors in choosing a mutual fund. Many do-it-yourself investors have grown weary of excessive tax liability, high fees, and restricted control of mutual funds. That’s why so many have switched to personal portfolios. ⁽²⁾

Mutual Funds Meaning and Definition

Here is the exact meaning and definition of mutual funds according to The Wall Street Journal in their published book “Lifetime Guide to Money”.

Investment companies that provide a way for small investors to pool their money so that together they can afford to hire a professional money manager. Shareholders usually can buy or sell mutual fund shares on any day that the securities markets are open. Though a fund is technically owned by its shareholders, it is usually set up, managed, and distributed by the fund’s investment adviser and its affiliated companies.⁽³⁾

Source and References

⁽¹⁾ Suze Orman, Author, The Money Book for the Young, Fabulous & Broker, Riverhead Books, New York 2005, page 379-380
⁽²⁾ Brian O’Connell, Author, Build Your Own Mutual Fund, Adams Media 2004, Avon Massachusetts, USA, Page 239
⁽³⁾The Wall Street Journal: Lifetime Guide to Money, Hyperion, New York USA 1997, Page 501

I hope those meaning and definition will give you an idea what are mutual funds. Share your experience in investing in mutual funds and which mutual fund type do you prefer to invest your money.