Mutual Funds are professionally managed investment funds, which invest in stocks, bonds, and other financial instruments. Mutual funds are considered "investment companies," and can take the form of a corporation, business trust, partnership, or limited liability company that issues securities. The funds are primarily engaged in the business of investing in securities.
The mutual funds have a stated objective with managers who are suppose to meet those objectives. The cost of trading and payment for managing the fund is taken out before the shareholders see their profit. Mutual funds are different from hedge funds as the SEC regulates the mutual funds with specific rules that they are required to follow.http://www.sec.gov/investor/pubs/inwsmf.htm
Top Mutual Funds in the Last 10 Years
- Wasatch Micro Cap, 25% increase
- Kinetics Internet, 23% increase
- Bjurman, Barry Micro-Cap Growth, 23% increase
- Bridgeway Ultra-Small Company, 23% increase
- FMI Focus, 21% increase http://www.fool.com/investing/mutual-funds/2007/10/29/the-markets-10-best-funds.aspx
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This video by Wallsteetetv which is hosted on YouTube explains the simple basic concepts of what a mutual fund is and how it operates. The announcer explains how the mutual funds make money, then take their cut for managing the money, before sharing with the shareholders their profit.