when setting aside their money in mutual funds these households can access a broad range of investments which can help cut their risk compared to investing in a single stock or bond investors earn returns based on the fund s performance minus any fees or expenses charged mutual funds are often the investment of choice for middle america providing a broad swath of middle income workers with professionally managed portfolios of equities bonds and other asset classes 3
understanding mutual fundsmutual funds are defined as a portfolio of investments funded by all the investors who have purchased shares in the fund so when an individual buys shares in a mutual fund they gain part ownership of all the underlying assets the fund owns the fund s performance depends on how its collective assets are doing when these assets increase in value so does the value of the fund s shares conversely when the assets decrease in value so does the value of the shares the mutual fund manager oversees the portfolio deciding how to divide money across sectors industries companies etc based on the strategy of the fund about half of the mutual funds held by american households are in index equity funds which have portfolios that comprise and weigh the assets of indexes to mirror the s p 500 or the dow jones industrial average djia 4 the largest mutual funds are managed by vanguard and fidelity they are also index funds these generally have limited investment risk unless the entirety of the market goes down nevertheless over the long run index funds tied to the market have gone up helping to meet the investment objectives of many future retirees most mutual funds are part of larger investment companies or fund families such as fidelity investments vanguard t rowe price and oppenheimer 