Mutual funds are investments made in pools of stocks, bonds, and other assets to diversify risk. Mutual funds can be managed passively or actively. Passive management means that the fund arranged to invest in accordance with a specific investment strategy as identified by the fund's prospectus. Active management is when the fund manager tries to beat a benchmark index (such as the S&P 500) at their discretion.

Mutual funds allow investors access to professionally managed investments and an opportunity for diversity not available from individual securities or private equity offerings. Mutual funds typically have lower minimum investment requirements than private equity offerings, but this can vary from company to company, depending on its structure.

Mutual funds seek to replicate an index of securities or diversify risk by buying a combination of securities. Other investors in mutual funds are required to match the fund's holdings. This is known as "leveling" and is crucial for maintaining the pool's value. In theory, to ensure that all investors receive an equivalent return, this requirement means that if any investor sells their holdings, they must repurchase them at the same price as another investor who has not sold. If this cannot be done, some investors will receive more than their proportional share of returns while others will receive less than their proportional share. Tha leads to what is referred to as a "capital structure imbalance."

Mutual funds are a convenient and relatively safe way for individuals to invest in the stock market. It is essential to educate yourself about mutual funds so that you can make an informed decision about investing.

Mutual fund fees can vary significantly from one fund to another. However, a typical average annual fee is 0.7% of assets under management and an additional 0.25% when the investment equals at least 1 million dollars. The maximum expense ratio for any mutual fund is 1%.

Mutual funds often require a minimum investment. This typically ranges from $250 to $3,000. Mutual fund companies must display the exact fees and minimums on a fund's prospectus. To check the fee structure of any mutual fund you are considering investing in, and you must study this prospectus. Fund prospectuses can be found at most financial institutions, brokerages, and banks, or you can search for them online.

Mutual funds typically have an initial offering period when new investments may be made for a lower net price per share (also known as net asset value or NAV). During this time, the fund will often be trading at a discount of up to 10% of its NAV. After the initial offering period, the fund will probably trade in line with its NAV. Each fund has different pricing rules that may change periodically.

Mutual funds can represent a professionally managed investment option where there is a minimum amount of risk relative to an individual investor. Even so, there are risks associated with mutual funds and other investments like stocks. Investors should evaluate risk tolerance before investing in any financial product or service.