![]() The prospectus contains information about the mutual fund’s investment objectives, risks, performance, and expenses. The fund usually must send you the payment within seven days.īefore buying shares in a mutual fund, read the prospectus carefully. Mutual fund shares are “redeemable,” meaning investors can sell the shares back to the fund at any time. The price that investors pay for the mutual fund is the fund’s per share net asset value plus any fees charged at the time of purchase, such as sales loads. Investors buy mutual fund shares from the fund itself or through a broker for the fund, rather than from other investors. The more volatile the fund, the higher the investment risk. But past performance can tell you how volatile or stable a fund has been over a period of time. Dividends or interest payments may also change as market conditions change.Ī fund’s past performance is not as important as you might think because past performance does not predict future returns. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. The higher NAV reflects the higher value of your investment.Īll funds carry some level of risk. If the market value of a fund’s portfolio increases, after deducting expenses, then the value of the fund and its shares increases. ![]() At the end of the year, the fund distributes these capital gains, minus any capital losses, to investors. When a fund sells a security that has increased in price, the fund has a capital gain. The price of the securities in a fund may increase. The fund then pays the shareholders nearly all the income, less expenses. A fund may earn income from dividends on stock or interest on bonds. They also offer three ways to earn money: Mutual funds offer professional investment management and potential diversification. Target date funds, sometimes known as lifecycle funds, are designed for individuals with particular retirement dates in mind. Over time, the mix gradually shifts according to the fund’s strategy.
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