| Mutual funds have a long history and they refer | | | | plans. |
| to professionally managed collective investment | | | | Mutual funds operate under many different |
| scheme. By collective, i mean that they are | | | | securities, which include but are not limited to cash |
| owned by many investors who come together to | | | | instruments, stocks and bonds, all of which are |
| put their money in a common pool so as to | | | | further divided into sub categories. Stocks for |
| attract large returns. The pools are managed by a | | | | example, are divided into sectors, which could be |
| manager who ensures that the money is traded | | | | technology, biotech, agriculture or utilities. Bonds |
| in every so often. The profits or losses are | | | | are divided according to the type of insurer and |
| distributed among the investors annually in the | | | | these are the government, municipals and |
| form of dividends. | | | | corporations. They can also be classified according |
| The investments attract different types of | | | | to the period of time they take to mature. |
| returns depending on the type of security they | | | | An investment in mutual funds means that you |
| hold. Over the years, the returns have been seen | | | | are subject to a special set of regulatory, |
| to fluctuate but all the same, the investments are | | | | accounting and tax rules. The amount of taxes |
| considered to be among the most stable in the | | | | subject on the investment largely depends on the |
| market. Although the stock market crash of 1929 | | | | criteria that was used to attract the income that |
| greatly tampered with the growth of the | | | | is to be divided among the investors. Others are |
| investments, they later recovered, especially after | | | | entirely tax-free like government and municipal |
| the Securities Act was passed in 1933. Since then, | | | | bonds. Others are not taxed as long as they |
| people have really opted to have investments in | | | | distribute 90% of the income to shareholders. |
| these stocks especially as part of their retirement | | | | |