Mutual Funds

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How do you make money with mutual funds?

There are three ways:

  1. When you invest in a mutual fund, you buy shares in the fund. If the value of the fund’s investments increases, the fund’s price per share (its Net Asset Value or NAV) rises and the value of the shares you own appreciates (increases). You will make money if you sell your shares for a higher price than you paid for them.
  2. If the fund realizes earnings from its investments, either dividends from stocks or interest from bonds or money market securities, it distributes the earnings to shareholders in the form of dividends.
  3. If the mutual fund manager sells some of the fund’s stock or bond holdings for a profit, the fund earns capital gains, which are distributed to the fund shareholders.