Definitions

Mutual Funds

What is a mutual fund?

Mutual funds are operated by an investment company which pool investment money from many shareholders and invest it into a portfolio based on a consistent investment philosophy and offers investors the advantages of diversification and professional management. A single mutual fund may attract thousands of investors and billions of dollars in assets. The fund manager follows a specific strategy which is documented in the prospectus. Mutual funds are only sold by prospectus and a prospectus contains complete details on investment objectives, risks, fees, charges and expenses as well as other information about the investment company, which should be carefully considered. Please read the prospectus carefully prior to investing. The prospectus contains this and other information on the product and the underlying portfolios.

Mutual funds are designed to meet specific investment objectives and most fall into one of three general categories: equity, income and money market. Equity funds invest in stocks; income funds invest in bonds; money market funds hold cash investments. Mutual funds do involve risk. They are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Why would I want one?

Traditional savings vehicles may not be able to keep up with inflation and the rising cost of living. Mutual funds provide an opportunity to earn higher rates of return.

Because a mutual fund is made up of a diverse mix of holdings, it can reduce volatility -- poor performance of one investment is typically offset by the better performance of the portfolio's other investments.

Mutual funds offer the opportunity to invest in dozens of market sectors. There are, for example, technology, health care and financial service funds. You can choose funds that invest in specific asset classes, too, such as bonds or foreign stocks.

Mutual funds provide liquidity, generally allowing you to sell shares at any time at the current market value. Many also provide the convenience of automatic investing and withdrawal programs, reinvestment of fund distributions and exchanges between funds.

Finally, since mutual funds are managed by experienced investment professionals and grounded in the research of expert analysts, you don't have to spend countless hours researching individual stocks and bonds.

As with all benefits there are negatives to mutual fund investing. While having a professional money manager provides professional services but this also takes away any control you would have in the decisions of how and where your money is invested within the fund. While diversification is a great method to manage risk, there is a downside to diversification in that if the fund’s top holdings perform extremely well, it may not make much of a difference in the funds overall performance.

When investing in mutual funds, careful consideration must be taken to understand the fees associated with owning the mutual fund. These fees will take away from the overall performance of the fund.

Keep in mind that each mutual fund invests in a specific types of investments based on the fund’s investment objective stated in the prospectus, so a single fund may not provide a level of diversification sufficient to meet all of your investment needs. However, you may need a handful of mutual funds to provide appropriate level of diversification you need.

Explore Our Mutual Funds

Mutual funds are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Because you could lose money investing in a mutual fund, be sure to carefully read all risk disclosure contained within a fund's prospectus prior to investing.

Please keep in mind that mutual fund shares: Are not FDIC insured | May lose value | Come with no bank guarantee | Are not insured by any government agency.