An open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund. Benefits of mutual funds include diversification and professional money management. Mutual funds offer choice, liquidity, and convenience, but charge fees and often require a minimum investment. A closed-end fund is often incorrectly referred to as a mutual fund, but is actually an investment trust.

Mutual funds offer beginning investors an opportunity to buy shares of stock of many companies inside the mutual fund therefore providing them diversification and potentially less volatility than they would have buying one individual stock at a time. An investor has choices as to the type of share class they can buy through an advisor: typically A, B, or C’s. A shares charge an up front sales charge but have lower annual expense charges than do B’s or C’s. B shares have a deferred declining sales charge over the first usually 7 years with higher annual expenses than an A share after which the share converts to an A share for purposes of the annual expenses. C shares offer no sales charge but have a higher annual expense for the life of the fund. For long-term investing, A shares are usually the least expensive and may also provide sales charge discounts if the investor invests larger sums of money.

Before our clients purchase mutual funds with us we determine their risk tolerance and develop a portfolio of mutual funds tailored to their risk tolerance and objectives.