What is a mutual fund?
A mutual fund is a security that pools money from investors to purchase stocks, bonds, or other securities for its portfolio. As a result, investors then typically own a portion of a portfolio that includes many more stocks and bonds than they could afford to purchase individually.
Investors purchase shares of the portfolio — the value of which increase or decrease based on the value of the investments it holds. The fund distributes any income it receives from stock dividends or bond interest to the shareholders, along with any capital gains from the sale of securities.How do I decide what mutual fund to buy?
Different types of mutual funds help meet a variety of investment objectives. Before you select a fund consider your:
- Investment goal: Are you saving for retirement? A child's education, a home purchase?
- Time horizon: Will you need to use this money in the next six months, two years or 20 years?
- Dollar amount: Do you have several thousand dollars to invest at one time or do you plan to invest just a few hundred dollars a month?
- Risk tolerance: How much fluctuation can you stomach in the price of your shares?
Most mutual funds focus their investments in stocks, bonds, cash equivalents, or a combination of the above. The individual securities a fund holds depends upon the stated objective of the fund. For example a fund may concentrate on:
- Growth or value investments
- Fixed income securities with short or long-term maturities
- Small-cap, mid-cap, or large-cap sized companies
- US companies, or international companies
Your risks and potential rewards will vary according to the underlying securities of the fund's portfolio. Learn more in our "Types of Mutual Funds" article.Why should I consider owning mutual funds?
Most mutual funds offer:
- Professional management
- Affordable minimum investment amounts
A diversified portfolio with a variety of investments may reduce the impact of one poor performing investment by offsetting it with another that may perform well during the same time period. Therefore, the overall performance of the investments in a mutual fund's portfolio has the potential to provide better returns over the long-term.How do I purchase a mutual fund through a Wells Fargo Advisors brokerage account?
- Visit the Mutual Fund Center on wellsfargo.com
- Select and open a Wells Fargo Advisors brokerage account
- Read and consider the prospectus of the funds
- Purchase the fund through your brokerage account
Whether you wish to invest on your own or with the advice of a financial advisor, Wells Fargo Advisors offers a variety of investment accounts such as brokerage, IRA, and Education Savings Account.
For more information on types of mutual funds, reviewing historical performance, and buying and selling funds see our additional mutual fund investing articles.
Mutual funds available without transaction fees may change at any time without notice. Therefore, any mutual funds purchased without a transaction fee may be subject to a transaction fee for subsequent purchases or upon liquidation.