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The Feeling's Mutual

Investing in mutual funds

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This story appears in the April 2000 issue of Business Start-Ups magazine.

Here's a trick even Doug Henning can't top: How can you invest in the stock market without actually buying stocks? Presto! The magic comes via mutual funds, a marvelous yet too often misunderstood way of getting started in stocks. Mutual funds are simple, so let's unlock the lexicon. "Mutual" means together, or shared. "Fund" means money. A mutual fund pools thousands of investors' money and buys a portfolio of investments designed to achieve a particular goal. There are tons of types: for one, stock mutual funds invest in stocks. Bond mutual funds invest in-you guessed it-bonds.

Why buy a stock mutual fund instead of buying individual stocks? Professional management. When you invest in mutual funds, you don't have to sit around analyzing stocks, tracking interest rates or charting commodity prices. The actual buy-and-sell decisions about what makes up the fund's portfolio are handled by the fund manager, whose entire job is to pick securities he or she believes will appreciate in value. You pick the fund, but the fund manager picks the stocks, bonds or other investments that make up the fund's portfolio.

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