Mutual funds are actively managed by a professional money manager who constantly monitors the stocks and bonds in the fund's portfolio. Mutual funds are a beautifully conceived investment vehicle designed to provide long-term wealth for passive investors. Mutual funds are excellent for the new investors because you can invest small amounts of money and you can invest at regular intervals with no trading costs. Mutual funds are a hot commodity with individual investors and financial institutions. Mutual funds are great for long-term investments like these.

   Money

  Money Market Funds funds have relatively low risks, compared to other mutual funds (and most other investments). Money market funds hold 26% of mutual fund assets in the United States. Money market funds, also known as principal stability funds, seek to limit exposure to losses due to credit, market, and liquidity risks. Money market securities must be highly liquid, and have a stable value. Money market funds seek a stable $1.

   Investors

  Investors like to see not only the rate of return for an individual mutual fund, but also how that fund compares to other similar funds. Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. Investors typically purchase shares in small quantities through brokers at a small premium or discount to the net asset value; this is how the institutional investor makes its profit. Investors who use a tax-advantaged account can defer, or avoid, paying taxes on mutual fund distributions. Investors who use a tax-advantaged account can defer, or avoid, paying taxes on mutual fund distributions.

   Shares

  Shares of mutual funds are not deposits of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. Shares of mutual funds are bought and sold at the fund's net asset value. Shares of mutual funds are subject to investment risk, including possible loss of the principal amount invested, and will fluctuate in value.

  Mutual funds are now popular in employer-sponsored defined contribution retirement plans (401(k)s), IRAs and Roth IRAs. Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Mutual funds are divided into two categories: closed-end and open-end. Mutual funds are required to distribute their income to shareholders once a year. Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors.