Mutual funds, also known as open-end funds, are diversified portfolios of securities that are managed by investment professionals. Unlike other forms of investment, mutual funds offer access to various financial markets. Because they must register with the SEC, they are subject to strict regulations that ensure investors are protected.
Mutual funds work by pooling money from a variety of investors then investing in stocks, bonds, t-bills, CDs, and other securities. Fund shares are determined solely by the market prices of their underlying assets. And they are bought and sold at their net asset value (NAV), which means share prices can fluctuate, unlike money market accounts and CDs.
There is usually a requirement to invest at least $1,000 to get started with a mutual fund, but afterward, you don’t need additional money to continue making investments.