Mutual funds buy and sell stocks, bonds,
or other securities. A fund raises money to make its purchases,
known as its
underlying investments,
by selling shares in the fund. Earnings
the fund realizes on its investment portfolio, after the trading costs and expenses
of managing and administering the fund are subtracted, are paid out to the fund's
shareholders.
Mutual funds, also called open-end funds, sell as many shares as you and other investors want to buy and redeem any shares you want to sell. This makes mutual funds among the most liquid investments — though the price at which you sell may be less than your purchase price if the value of the fund has dropped. You can make a one-time purchase, buy additional shares when it's convenient for you, or invest a fixed amount on a regular schedule.
While there is a wide variety of open-end mutual funds, they
all have the following features:
