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What Are Mutual Funds?

Although I work in the financial services sector, I could not describe to anyone what a mutual fund was. I had no definition in my mind other than it being yet another type of investment. So, I decided that it was time I did some research on mutual funds.

A mutual fund is a “company” that is made up of stocks, bonds and other securities which are known as a portfolio. When you invest in a mutual fund you are buying units in the fund which usually has lots of other investors. So, a group of people come together to invest in a pool made up stocks, bonds and other securities.

This pool of money is usually monitored by a professional manager who works on behalf of the investors. That manager decides which stocks and bonds to invest in. He or she buys or sells the securities to make the pool grow.

One good attribute about a mutual fund investment is that your investment is spread among several securities and not just one in particular. This is especially comforting because if you invest in one security and it fails, your money is gone. But this could also work the other way. If one particular security performs really well, and you have your investment spread around, your gains might not be as great.

Mutual funds are available at many financial institutions in Barbados. It should be noted that each financial institution is different and so the mutual funds offered might have different attributes. When looking into mutual funds, make sure that you gather as much information as possible including the performance trends.

Image: Austin Distel via Unsplash