You can also purchase mutual funds directly from the fund company or through a workplace retirement plan such as a 401(k), 403(b), or 457 plan. Most can be purchased through a brokerage account. Popular funds within these categories include target date, asset allocation, global/international, and specialty. In general, mutual funds fall into three broad categories: equity, fixed income (bond), and money market. Although diversification can help manage risk it cannot guarantee a profit or protect against loss. By spreading your investments across different asset classes, industry sectors and types of investments, the fund seeks to reduce risk from any one investment. These types of mutual funds offer diversification across hundreds or even thousands of securities.ĭiversification is an investment strategy used to manage risk. Some mutual funds, such as target date or asset allocation funds, invest in other funds. Mutual funds generally offer broad diversification across different asset classes. The prospectus is a legal document which contains information on the fund’s investment objectives or goals, principal strategies for achieving those goals, principal risks of investing in the fund, fees, charges and expenses, past performance and other important information you should consider before investing. Mutual funds are sold by prospectus only. An investor then owns shares of the mutual fund and not the individual securities the fund holds. It is professionally managed according to stated investment objectives found in the fund’s prospectus. A mutual fund is an investment company that pools money from many investors and invests the combined holdings in a single portfolio of securities that may include stocks, bonds, other securities and cash and cash alternatives, such as Treasury Bills, certificates of deposit (CDs) and money market funds.
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