The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees as though she is. Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else's car. Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total performance. Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients. Here are some of the general categories of mutual funds.
Bonds are IOUs, or debt, issued by companies or by governments.
A purchaser of a bond is lending money to the issuer, and will usually collect some regular interest payments until the money is returned. Balanced Funds Balanced funds mix some stocks and some bonds. It is important to know the distribution of stocks to bonds in a specific balanced fund to understand the risks and rewards inherent in that fund. Stocks represent part ownership, or equity, in corporations, and the goal of stock ownership is to see the value of the companies increase over time. Analyzing Stocks .