Description - What is a Mutual Fund?
This lesson will help you research mutual funds on the Internet for investment purposes.

  • Bonds: An IOU that a company or government sells when it borrows money. Bonds are called fixed-income investments because they pay a fixed amount of interest to the bondholder for the use of his/her money.
  • Closed-end funds: Like open-end mutual funds, these are collections of securities managed by a professional investment advisor. Unlike open-end mutual funds, their shares are traded on a stock exchange like ordinary stock.
  • Diversification: An investment strategy in which you spread your investment dollars among different markets, sectors, industries, and securities. The goal of the strategy is to protect the value of your overall portfolio in case a single security or market sector takes a serious downturn and drops in price.
  • Exchange-Traded Funds: Funds whose shares, like closed-end funds, are traded on a stock exchange. These invest in stocks or bonds that closely follow an index.
  • Index: An index reports changes, usually expressed as a percentage, in a specific financial market, in a number of related markets, or in an economy as a whole. Each index — and there are a large number of them — measures the market or economy it tracks from a specific starting point, which might be as recent as the previous day or many years in the past.
  • Mutual funds: An investment instrument developed and managed by a company that pools members’ money—often millions of dollars—to invest in a variety of stocks and bonds. Investment professionals who research companies and buy or sell stocks actively manage the funds based on what they think is best for the fund’s shareholders.
  • Open-end funds: Funds that usually sell as many shares as investors want to buy. Sometimes open-end funds stop selling shares to new investors when they grow too large to be managed effectively. Investors who want to sell shares of their open-end funds, sell them back to the mutual fund.

After this activity you need to be able to…
  • Define and identify the characteristics of a mutual fund
  • Use the Internet to research mutual funds.
  • Use the research on mutual funds to help determine team investments for the Stock Market Game.
  • Create and deliver a 5-min presentation on mutual funds, their risk and performance

Be able to discuss in small group discussion the knowledge you individually gained.