Mutual funds may be open-end or closed-end funds. The term "mutual funds" is used most often to mean open-end funds. Open-end funds issue new shares continuously as investors buy them. Investors redeem their shares directly to the fund, which in turn must buy them back. Closed-end funds issue a fixed number of shares that the fund may redeem only upon termination of the fund's trust. Shareholders in a close-end fund may, however, sell their shares through a broker on the secondary market to other investors but not back to the fund. This first section of this paper will focus on mutual funds. Followed by hedge funds
Mutual funds are among the most popular investments on the market. There are over 8,000 of them holding over $4 trillion dollars. Many people buy them because of their competitive returns. Others like them because they are easy to buy and sell. Still others cite the fact that mutual funds, because they hold several investments, can spread risk.
Mutual funds have been around for a long time, dating back to the early 19th century. The first modern American mutual fund opened in 1924, yet it was only in the 1990’s that mutual funds became mainstream investments, as the number of households owning them nearly tripled during that decade. With recent surveys showing that over 88% of all investors participate in mutual funds, you're probably already familiar with these investments, or perhaps even own some. In any case, it's important that you know exactly how these investments work and how you can use them to your advantage.
