Chapter 3. Understanding Mutual Funds: The Nitty-gritty Details
This chapter reviews the basic terminology and mechanics of mutual funds. I refer to these items in later chapters, so it is worthwhile to review the basic details now. For example, it is essential to know the difference between a money market fund and an equity fund, both of which are mutual funds. Also, it is important to understand the difference between the sales charge on a fund and the expense ratio that includes the management fee.
Initial Investment
Most funds have a minimum initial investment requirement, often in the range of $2,000 to $3,000. For that initial investment, an investor can buy into the fund, becoming a shareholder. Thereafter, the investor gains or loses as ...
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