A mutual fund company pools the resources of many investors in order to invest in stocks or bonds of other companies, thus creating a portfolio. Investors may then buy or sell shares in the mutual fund company. Each mutual fund share represents a fraction of each stock or bond bought by the mutual fund company.
Mutual Funds are usually sold at Net Asset Value (NAV). NAV is determined daily and is the total current value of the fund's net assets, divided by the total number of mutual fund shares outstanding.
Mutual Fund shares are typically sold as Load Funds or No Load Funds. With a Load Fund in addition to the NAV, you may pay a form of commission to the seller. Other fees may include a 12b-1 fee, which is assessed annually and helps cover the mutual funds marketing and distribution costs. A No Load Fund has no commission or redemption fees, however it might levy some kind of sales charge, such as a 12b-1 fee.
A word on fees: "No load" and "load" can be confusing terms, and many supposedly "No Load" Funds add substantial fees (such as 12b-1 fees) that make their cost approach that of a load fund.
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