Understanding Investment Funds

Mutual funds and exchange-traded funds are groups of individual investments bundled together.

Mutual funds and exchange-traded funds are groups of investments bundled together. Different combinations of equities, bonds, alternative, and cash serve as building blocks for thousands of investment funds.

Mutual Funds

A mutual fund is made up of money collected from investors and used to purchase investments like cash, bonds, stocks, and other assets. They are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus. Fund value is determined at the close of the trading day.

Exchange-Traded Fund (ETF)

An ETF is an investment that tracks a particular set of investments, similar to an index. ETFs are similar to mutual funds in many ways, but trade just as a normal stock would on an exchange, with their price adjusting throughout the day rather than at market close like a mutual fund. ETFs can track investments in a single industry, such as energy, or an entire index of investments like the S&P 500 Index, which tracks 500 large publicly traded U.S.companies.