One of the simplest ways to invest money is to buy a Mutual Fund. The investment vehicle offers professional money managers who will make decisions on your behalf, and the fund’s investment strategies are usually based on a variety of factors. There are two types of Mutual Funds: active and passive. Active management involves actively directing the investment process, while passive management is more about risk management. Both types of funds are a good choice for a number of reasons.
There are three basic types of mutual funds: stock and bond. Stock funds have the highest potential for return but also carry the highest risks. This is because the returns of equity funds are based on the performance of the underlying stock market. Different types of equity funds include growth, income, and sector funds. Bond funds, on the other hand, are lower-risk but still have risks. Investors should research different bond fund types before investing.
There are also several types of mutual fund fees. Some mutual funds have a back-end load, which investors pay when they redeem their shares. The back-end load typically decreases over time. Additionally, investors should keep in mind that contingent deferred sales charges are also included in the price of a fund. These are fees that are deducted from the redemption proceeds. In addition, there are distribution and service fees, sometimes called 12b-1 fees in the United States. All of these fees reduce the net asset value of the mutual fund.
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