The Mystique of Mutual Funds

What are mutual funds?
A mutual fund is a pool of many investors’ money. This idea started becoming popular in the 1970s and have now become the favorite tool for many investors. By pooling and investing together, you reduce the risk.

What are the type of mutual funds?
There are two types of funds. They are open-ended and closed mutual funds. In an open-ended fund, the fund will be open to new investors all the time and the fundhouse will redeem units upon request by exist unit holder. In a closed-end fund, new units are not issued. A fixed amount of units are issued when the fund is opened and then the fund is closed to new investors. However existing unit holders can trade their unit son the market with one another.

How does a mutual fund work?
A mutual with say $100M will buy 100 stocks each for $1M. So the portfolio will now contain 100 stocks. The fundhouse or the Asset Management Company which manages the fund may issue 1 Million units. Then the Net Asset Value (NAV) of this fund will be calculated by determining the market value of all the stocks in the fund and then dividing that by the number of units of 1 M. This will give the NAV price for each unit of the fund.

What are some good mutual funds in the US?

There are many other thousands of funds to choose from.

What are some best international small cap funds?
1. Wanger International Small Cap Adv (WSCAX)

2. Columbia Acorn International Select A (LAFAX)

More on mutual funds tomorrow.


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