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Mutual Funds
When you invest in a mutual fund
, your money is combined or pooled with the money of other investors and used
to purchase specific types of securities. Mutual funds are run by investment
professionals who decide which investments to buy or sell for the fund. The
professional picks from a wide variety of stocks, bonds, money market
instruments, or other financial instruments. The investments selected will
depend on the fund's investment objectives. That's why it's so important for
you to choose a fund with objectives compatible with yours.
Some mutual funds, such as money market mutual funds, are designed for
individuals who want to invest for only a short time and have easy access to
their money, sometimes by writing a check. Many of these funds invest primarily
in government securities or very short-term bank CDs. Many people who don't
want to take too much risk invest in this type of fund. Other funds invest in
bonds sold by corporations or municipalities that pay regular dividends and
carry higher interest rates. These funds can provide steady income but may be
more risky. See the reference list
at the back of this brochure if you want to know more about these and other
types of mutual funds.
The types of investments that a mutual fund holds, its investment goals, the
fees charged, and information about who manages and advises the fund are
described in a prospectus
. You should receive and review a prospectus before investing.
The prospectus usually tells you how well the fund has performed in the past.
This information can give you an idea about what you might earn on your
investment. As with all investments, however, past performance is no guarantee
of future results. All investments carry some risk, including loss of
principal.
Banks use different arrangements to sell mutual funds. Some banks simply rent
space in bank lobbies to outside companies. Other banks sell proprietary funds.
These funds are sponsored by an outside entity. The bank then advises the fund
about what investments to make. It receives a fee from the fund for that
service. Other banks offer private label
funds. These funds are sponsored and managed by an outside entity but are sold
exclusively through the bank.
Some mutual funds have names similar to a bank's name. But just like other
mutual funds or investment products, those funds are not backed by the bank or
insured by the government.
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