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A '''mutual fund''' is a selection of professionally bought and managed [[stock]]s in which [[money]] is pooled by an [[investment]] company.  The funds continually offer new [[shares]] and buys existing shares back on demand and uses its [[capital]] to invest in diversified [[securities]] of other companies.  

A '''mutual fund''' is a selection of professionally bought and managed investments in which [[money]] is pooled by an [[investment]] company.

The share price of the mutual fund is based on the [[net value]] of the [[asset]]s or the value of all the investments owned by the fund, less any [[debt]]s.  The major advantage of mutual funds is a reduced [[risk]] - the money is spread across several investments.  If one or two do poorly, the remainder may do better, averaging the loss.  For many small investors, another advantage of mutual funds is that they do not have to watch the [[Stock exchange|stock markets]] constantly, and do extensive research into each stock.

The funds continually offer new [[shares]] and buys existing shares back on demand.  The share price of the mutual fund is based on the [[net value]] of the [[asset]]s or the value of all the investments owned by the fund, less any [[debt]]s and expenses for fund management.

A mutual fund may invest in bonds, stocks, or both.  It may track a major index (such as the [[Dow Jones Industrial Average]] or the [[Standard and Poor's]] 500) or may invest in a sector of the economy (such as a mutual fund investing in retail stocks, or bonds issued within the state of [[Texas]]).  It may also be a mix of other mutual funds.

The major advantage of mutual funds is a reduced [[risk]] - the money is spread across several investments: if one or two do poorly, the remainder may do better, averaging the loss.  For many small investors, another advantage of mutual funds is that they do not have to watch the [[Stock exchange|stock markets]] constantly, and do extensive research into each stock.

A "target date" fund is a special type of mutual fund which is designed for long-term retirement investing: in the early periods the fund will invest heavily in stocks and more risky investments, but as the date approaches the fund will shift to conservative investments (though with some risk in order to keep pace with inflation) so as to preserve capital.  An example is the "Lifecycle" Fund series within the United States Government [[Thrift Savings Plan]]; funds with years closer to today's date are invested more prominently in the income fund offerings (G and F) while those with dates far off are invested more prominently in the stock fund offerings (C, I, and S).

A mutual fund may invest in bonds, stocks, or both.  The fund may track a major index (such as the [[Dow Jones Industrial Average]] or the [[Standard and Poor's]] 500) or may invest in a sector of the economy (such as a mutual fund investing in retail stocks, or bonds issued within the state of [[Texas]]).  It may also be a mix of other mutual funds.

 

A special type of fund designed for long-term retirement investing is the "target date" fund.  As its name suggests, when the fund is created it will invest heavily in stocks and more risky investments, but as the "target date" (usually the fund has the year in its title) approaches the fund will shift to conservative investments (though with some risk in order to keep pace with inflation) so as to preserve capital.  An example is the "Lifecycle" Fund series within the United States Government [[Thrift Savings Plan]]; when a new Lifecycle Fund is created it is invested more prominently in its traditional stock fund offerings (C, I, and S) and less in its income producing fund offerings (G and F), but as the target year approaches the mix shifts more toward G and F and away from C, I, and S.

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