A mutual fund is a financial product gathering a big amount of small savers who want to invest their money. It works in a very simple way, since it tries to join a broad single capital to operate in financial markets having great advantages, something impossible if each one of those capitals were independent.
What mutual fund investors will do with all the gathered money is invest it in a diversified offer offer of values like shares, bonds, currency, derivatives, etc. When money is invested in a mutual fund what you really do is buying a small part of different values in which it is invested. That is you will own a few shares of a particular company, or you will own a few fixed income titles of some country.
This way mutual funds have the following functional structure: private investors put the money; the managing society decides where and how much to invest, and it is composed by stock market professionals. At last, the trustee in charge of watching over those values they have been invested in. These societies, naturally, will obtain their profits from charging the corresponding commissions for each completed action.
Each mutual fund has an information brochure available for all users, where it specifies the investment general policy allowed or the amount of those commissions.
Mutual funds have many advantages, amongst which some can be highlighted:
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