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Initial Investment

Most funds have a minimum initial investment requirement, often in the range of $2,000 to $3,000. For that initial investment, an investor can buy into the fund, becoming a shareholder. Thereafter, the investor gains or loses as the mutual fund gains or loses. The minimum investment for shareholders wishing to add to their account is typically relatively small, such as $250.

Insights

Throughout this discussion, remember that a mutual fund is simply an intermediary, passing on the income earned (interest, dividends, or both) as well as the capital gains and losses (both short term and long term). In effect, the shareholders have hired professional managers on their behalf to take care of all decisions. The shareholders own the mutual fund, the mutual fund holds a portfolio of securities, and therefore the shareholders indirectly own the portfolio of securities.



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