PCCLOSEOUT

A mutual fund starts out as a pool of money that many investors just like you have put their money in together— mutually. The manager or managers of the fund take all this money and put it into different investments. The manager is the one who decides what he or she wants to buy and sell. Sometimes these decisions are made by a team of people; more often just one person or two people decide, based on their judgment and research by many others.
Each mutual fund invests in different things, and the goal of each fund is different. Some invest for long-term growth, some for income, some for a combination of both. (Income funds invest in bonds and have lower chances than a growth fund of making a lot of money; they generate present-day income— retirees might own these, for example, after they’ve seen their money grow during their working years.) Some invest in stocks just in the United States; some, those known as international funds, invest only in stocks overseas; funds called global funds invest in both. The variations go on and on, but if you have a specific interest, I guarantee that you can find a mutual fund that addresses it. When you invest in a mutual fund, basically you own a tiny fraction of each share of stock or whatever they’ve purchased, so even if you own just one mutual fund, your money is still quite diversified, because you own a little of everything they’ve invested in.
If you had a financial adviser at a full-service brokerage firm like Merrill Lynch, he or she would have to consult you before making any transactions, and you would have to pay a commission almost every time you bought or sold anything. That’s not the case in a mutual fund, where the manager has free rein over the money in the fund and you’re not charged a commission when transactions are made. You will receive a prospectus and information with a breakdown of what the mutual fund has been up to, but you’re not notified day to day, By buying shares in the fund, you have made the decision to trust the fund manager.
A good mutual fund is a great way to invest money, particularly small sums of money: You achieve diversification, commission-free trading within the account, and a professional manager or team of managers who are buying and selling and doing what they think best.