How a Mutual Fund Works

The idea that there is strength in numbers is the heart of mutual funds. Most mutual funds fall into three categories: money market funds, bond funds and stock funds. A fund invests in many different companies or types of securities within its category.

A mutual fund brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings are known as the fund’s portfolio. When you invest in a fund, you own shares in the fund’s holdings.

Each mutual fund is different in its make-up and philosophy. Your investment professional can help you determine your investment goals and risk tolerance and help you select a fund.

Define your goals, work back

Consider your investment goals when choosing a mutual fund type. You will find many funds with objectives and risk levels that match yours. Options range from higher risk funds with the potential for higher returns to more conservative funds designed to attempt to help you keep up with inflation.

Once you invest, a professional money manager is responsible for making sure the fund stays true to its objective. Keep in mind that there’s no guarantee that the objective will be achieved.

Remember, most mutual funds require a minimum initial investment and you will pay sales charges and expenses.

Explore fund specifics

Always start by reading the fund’s prospectus and other documents before choosing a fund. Look for crucial information about the fund like:

• Investment objective and strategies
• Risks
• Fees and expenses

You can also get third-party information about the mutual fund through an independent fund rating service. Check online or at your local library. Request a prospectus from your investment professional and read it carefully before you invest.

Have more questions about mutual funds or ready to buy a Nationwide mutual fund? Contact an investment professional today.