Be aware, however, that even a profes sional money manager cannot insure against a loss of principal. The mutual fund manager will invest in many different securities. This diversification of portfolio assets means that you as an investor have not pinned all your hopes on one company's success. Also, because the portfolio holds many securities, the negative impact that any one company may have on the fund is diminished. While diversification is a benefit of mutual fund investing, a mutual fund is still impacted, either favorably or unfavorably, by the ups and downs of the market in general.
Mutual funds provide a relatively easy way to invest.
In addition, a mutual fund stands ready to buy back, or redeem, your shares at any time. This liquidity allows you to get your money when needed. There is no guarantee, however, that your shares at the time of redemption will not have decreased in value. The types of mutual funds vary according to the fund's investment objective. While not a comprehensive list of all mutual funds, the basic types of funds are described below.