More than 80 million Americans invest in MUTUAL FUNDS. To understand what a mutual fund is, it is essential to know what stocks are. Stocks simply are shares of ownership in a public company. A public company is a company that is authorized to sell shares of ownership to members of the public, most commonly through a stock exchange. The share price of a mutual fund is called the Net Asset Value (NAV).

A mutual fund is a collective group of investments combined into one firm. Typically, mutual funds include stocks or bonds, but they can include short term money market instruments. There are really three ways to make money on mutual funds:

1) You can make money either on interest from bonds or dividends from stocks.

2)You can make money on capital gain if the fund manager sells securities within the fund that have increased in price.

3)You can make money if you sell your shares for a profit in a mutual fund when the securities within the fund have increased in price but the fund manager does not sell the securities.

Typically, when you make money, you have the option of either receiving a check or reinvesting the money into more shares within the fund.

BENEFITS OF MUTUAL FUNDS

*Cost efficient (low transaction costs due to high volume of securities sold)

* Easy to Manage (You have a fund manager working on your behalf)

* Eliminate the need to buy individual stocks (Large mutual funds often have hundreds of securities)

* Liquidity (You can request your shares to be converted to cash at any time)

DISADVANTAGES OF MUTUAL FUNDS

* No Personal Control (You cannot directly influence the decisions of the fund manager)

*Same Fees (Even if the fund does poorly, you still have to pay the annual fees, or "internal expense charges")

NOT ALL MUTUAL FUNDS ARE CREATED EQUAL

Although many will tell you that buying a mutual fund is a smart investment move, how do you choose one among the 18,000 funds on the market? You could try looking at lists of top rated mutual funds, but a better idea is to ask your financial advisor. Perhaps you want to invest in the now popular green mutual funds or socially responsible mutual funds. Because we all have different financial needs and goals, you should seek a professional's advice as to what the best option for you is.

Mutual funds are certainly not fail-proof. The industry is not created solely to make your life easier. Remember, the fund and its management are in it for

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