A mutual fund is an investment company that sells shares. It takes the money it receives from selling shares and uses it to invest in securities, like stocks or bonds.
Each investor in the mutual fund owns a part of the fund’s portfolio that’s proportional to the shares they hold. If you buy more shares, you get a larger stake in the fund’s holdings.
“I think of it as a bowl of Skittles where you have all the different colors, each color representing a company, and you’re buying basically a little bit of that bowl,” says Andrew Aran, CFA, and managing partner at Regency Wealth Management.
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Regency Wealth Management is a SEC Registered Investment Advisor managing over $500 million for families and small institutional investors. Regency was founded in 2004, is headquartered in New Jersey, and serves clients across the country.