A mutual fund is by its name derives the meaning of it. Mutual means together and so in a mutual fund there are thousands of small investors participating. Basically a mutual fund is a fund which is invested in different types of securities, bonds and other assets. Small investors who do not have time or don’t have accurate knowledge about various securities can invest their money in a mutual fund.
You have to buy a share of mutual fund in order to invest in a mutual fund. You can invest in mutual fund with a very small amount and your investment would be in most diversified assets. In simple words you cannot invest $1000 in ten different types of securities but through mutual fund you can by buying a share of it.A mutual fund has benefits over a investing on your own. Firstly you don’t have to keep track of all of your investments since there is a fund manager appointed for a specific mutual fund who will take care of that. Secondly your investment portfolio will be diversified as your money will be invested in many different securities and assets thus reducing the overall risk of your investment. Third and the last advantage is that your fund will be managed by professional since it is their full time job.
If a mutual fund is open end you can invest in it buying a share. The share price is called Net Assets Value (NAV) which can be calculated as under:
Total value of the fund / No. of shares outstanding
For example total fund invested is $100,000 and number of investors are 10000 than value per share will be $10.
The price/NAV of the mutual fund is known after market closes and the changes are affected to fund in securities in which it was invested.
You can buy a mutual fund through your broker who will charge you some brokerage for that.