The most common are open-end funds. The other type is closed-end funds, which technically are not mutual funds. With a mutual fund, the big pool of money we talked about previously is managed by a company, which frequently the organization that started the fund. This management company either serves as or hires the fund's investment advisor. The advisor employs a portfolio manager and his or her research staff to select the investments for the mutual fund.
Mutual funds are subject to strict federal regulations.
The fund broker or other salesperson is required to give you a prospectus before you invest. The prospectus is an important document that spells out the investment objectives of the fund, risks, fees, and other important information. Generally, mutual funds continuously offer new shares to the public. They also are required legally to buy back outstanding shares at the shareholder's request. The net asset value is obtained when the fund figures the value of its investments, less liabilities, divided by the number of shares outstanding at the end of the day.