A look behind the lens Mutual funds are investment pools, where multiple investors purchase ownership in a vehicle that contains anywhere from a dozen to hundreds of different securities, such as stocks or bonds. Each mutual fund is managed by a professional investment manager (or investment team), who buys and sells these securities for the most effective management of the fund. When you purchase a mutual fund, that ownership provides you with a piece of each security within that investment pool—and your ownership is represented as a share. When there are profits generated from the securities in which a mutual fund invests, your share value increases. And, when there are losses generated from these same securities, your share value will decrease. If the securities in which a mutual fund invests generate dividend income or capital gains/losses, those, too, get passed on to each investor. The inner workings of a mutual fund The “Investor”
pools their money
which get
with other investors in a mutual fund.
passed back to
The “Fund Manager”
“Returns” on the investments
The securities
invests the pooled assets in
generate
“Securities” such as stocks and/or bonds.
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