How do mutual funds work?

You’ve heard about mutual funds, but what exactly are they and do they work?

Simply put, a mutual fund pools money from a group of investors and invests it in stocks or bonds. It charges the investor fees for doing so.

The value of a mutual fund share fluctuates depending on the net asset value of the securities it owns.

It passes dividends and interest it realizes after expenses back to its shareholders, usually quarterly, and it passes any net capital gains back to shareholders annually, usually in December.

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