Mutual funds are pools of money, invested by individuals, which are professionally managed by fund managers. The money the fund amasses is invested in stocks, bonds and other short term money instruments.
A fund will list its weighting and may typically look like this;
UK Stocks 60%
US Growth Stocks 25%
Latin American Growth Stocks 13%
Cash 2%
Mutual funds will charge a fee to enter the fund, usually around 3%. This is so people do not keep taking their money in and out, thus leaving the fund manager with a steady cash balance to trade with. Yearly management fees, often around 0.5% are also charged by the fund owners.
Mutual funds offer an individual a long term investment opportunity and some mutual funds have soared over 300% in 5 years! The best website on the internet for information on mutual funds is Morningstar. By registering for free, they allow you to quickly sift through hundreds of funds, with the user able to sort the funds by manager experience, years active, entrance fees, 3yr gain, 5yr gain etc.
