Wednesday’s Word: Mutual Funds

By Alisa Radut, Fall 2017 Investor Advocacy Clinic Intern

Mutual Funds are investment companies that combine money from different investors, and, based on specific goals, invest in stocks, bonds, money-market instruments, and other securities.  Shares can only be purchased from the fund itself or its broker (for example, they cannot be purchased from other investors).  Investors who wish to sell their mutual fund shares redeem them by selling them back to the fund, or the broker for the fund, and they receive the current net asset value per share.  Mutual funds are regulated by and registered with the SEC, and are managed by investment advisers, who are also registered with the SEC.  As with all investments, it is important to do your homework before deciding whether or what type of mutual fund is best for your financial goals.  The answers to some frequently asked questions regarding the different class types of mutual fund shares can be found on the FINRA website.  Keep in mind that the risks and fees associated with each mutual fund varies, depending on what type of fund it is.  FINRA also provides a useful list of five things you should know before investing in a mutual fund, including how much it is going to cost, and what the fund’s goals are.  To help further increase your investing knowledge, listen to FINRA’s podcast on Mutual Funds.