What Are Mutual Funds?

In the United States, mutual funds are a regulated form of investing. They are governed by a series of laws that were established over 50 years ago and it served investors well to define the terms and circumstances that an Investment Company can take in investing in underlying securities. In essence, they pool the funds of a number of people together and in turn invest in a pool of securities providing efficiencies in the investment process and diversification for smaller amounts that are invested. They have observed US investors extremely well and today in our market that is in excess of, I believe the number is 8 trillion dollars in the United States mutual funds. The risk of varies tremendously depending upon the asset classes in which they invest ranging from money market funds that invest in short-term high grade invest typically commercial paper, short term deposits, or other term invest notes. Those are at quite low risk to funds that invest in equity securities that may be fairly concentrated i.e. there are mutual funds that would invest exclusively in a single country or a single industry where it is diversified within that very narrow bound, but pretty concentrated risk that if you invest in technology stocks, your returns are going to be quite volatile and I am equating risk with the variability of the value of your asset day-to-day.

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