SECTIONOne
An Investor's Guide to Mutual Funds
Mutual funds are designed to make life easier for investors. Funds give savers of even modest means a convenient access to top-quality investment management at a reasonable price.
Since the mission of funds is to serve investors, we start this book by taking a look at mutual funds from an investor's perspective. We give an overview of mutual funds by focusing on five critical questions:
- Why invest through mutual funds?
- How do mutual funds work?
- How do investors research a potential mutual fund purchase?
- How do investors choose a mutual fund that's right for them?
- What does it cost to own a mutual fund?
This section has five chapters:
Chapter 1 provides an introduction to investing through mutual funds. It reviews their advantages and disadvantages, summarizes their history, and discusses how they are used by investors today. It concludes by providing an overview of the entities that work to ensure that funds meet their obligations to investors: the government regulators and the industry associations.
Chapter 2 describes the basic structure and operations of a mutual fund. It begins with a discussion of two key fund features: daily liquidity at net asset value and pass-through tax status. It explains how funds operate through contracts with service providers supervised by a board of directors, and it discusses the ethical standards that apply to fund managers. Finally, it compares mutual funds to alternative methods of investing, ...
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