Hedge Funds | What Are Mutual Funds?

Mutual fund shares:

All mutual funds charge fees to operate and manage the fund. Pay the costs of managing the fund managers (or managers) to manage the funds. Some funds charge an upfront sales investors / charge when he / she shares purchases for the first time in the background, while other funds charge a back-end load (deferred sales charge) for the sale of shares the fund. There are also funds that have no sales charge and these are known as "no-load funds." 12b-1 fees are imposed by some funds to cover the costs of marketing and distribution. There are also several types of funds differ in the cost structure according to the class (Class A, Class B, Class C, etc.)

Structure Mutual Funds:

Technically, mutual funds are "open-end" funds - one of the four basic types of investment companies. Closed-end funds, ETFs and mutual funds other three types. As investment companies, investment funds are regulated by the Investment Company Act of 1940.

Regulation of Mutual Funds:

Regulation of investment funds, compared with other collective investment options (think: hedge funds) is very broad. Investment funds must meet a strict set of rules that are monitored? The Securities and Exchange Commission. The SEC oversees compliance with the fund 's with the Companies Act 1940, Investment, and their adherence to other rules and federal regulations. Since its development, regulation of hedge funds has given investors the confidence in terms of the investment structure.

Diversification of investment funds:

The beauty of mutual funds is that you can invest a few thousand dollars into a fund and get instant access to a diversified portfolio. Otherwise, in order to diversify your portfolio, you may need to buy individual securities, which exposes you to greater risks and difficulties.

Another reason for investing in mutual funds is their adherence to a basic principle of investment. Don 't put all your eggs in one basket. In other words, many different types of investment. in a portfolio to reduce the risk of loss of any such investments. For example, if you put all your money in shares of a company and the company files for bankruptcy, you lose all your money. On the other hand, if you invest in a mutual fund that has many different populations, are more likely to grow your money over time. At least, the bankruptcy of a company 's not mean that you lose your entire investment.

Professional Money Management Mutual Funds:

Many investors don 't have the resources or time to buy individual stocks. Investing in individual securities such as stocks, requires not only resources, but a considerable amount of time. By contrast, managers and mutual fund analysts wake up every morning dedicated his professional life to research and analyze their properties and potential holdings of their funds.

Variety of mutual funds:

There are many types and styles of funds. There are stock funds, bond funds, sector funds, money market funds and mixed funds. Mutual funds allow you to invest in the market if you believe in active portfolio management (actively managed funds) or if you prefer to buy a market segment, without interference from a manager (passive funds and index funds). The availability of different types of funds allows you to build a diversified portfolio at low cost and without much difficulty.

While you have a lot of investment options (individual stocks, ETFs and closed-end funds, to name a few) funds offer a simple and efficient way to invest for retirement, education or other financial goals, by Lee McGowan, About. com.