MUTUAL FUNDS

Mutual funds are among the most popular investments.

A mutual fund is a pool of money from many investors that is invested into a portfolio of stocks, bonds, or other securities.

It is a ready-made portfolio. Investors who do not have the time or inclination to create their own portfolios are attracted to this diversification. Mutual funds are oriented toward income or growth.

Income funds invest in many of the income investments we discussed earlier. Growth funds invest in stocks and other growth investments.

Investors own shares of their mutual funds.

The value of a share, called the net asset value (NAV), changes daily.

The NAV is calculated from the value of the underlying securities held by the fund.

Mutual funds pay you dividends from earnings of the portfolio. The portfolio may earn interest, dividends, or capital gains from the sale of portfolio securities. You can also earn capital gains when you sell shares that have risen in value.

You can buy shares directly from a fund. Some investors prefer to buy shares through their brokers or financial advisors. Some investors like the convenience of an automatic investment plan that allows their fund to withdraw money from their bank accounts and invest it into the fund.

Mutual funds buy back your shares when you want to sell them. Many funds allow you to redeem shares over the telephone. The fund's prospectus explains your options for selling your shares.

Financial newspapers and other publications advertise mutual funds and provide toll-free numbers for prospectuses.

Finally, a brief mention of some other available investments.