Stock Market & Mutual Funds
An average investor with a retirement account is usually invested in the stock market through a Mutual Fund. A mutual fund is an investment company that takes investment funds from individual investors, pools it together and invests in certain markets, certain industries or with a particular investment strategy. Often, the experience and success of the fund manager is the primary drawing power of a mutual fund. The mutual fund was first created in 1940, on the eve of World War II. The Investment Company Act of 1940 established three types of mutual funds, open-end funds, closed-end funds, and unit investment trusts. The majority of investment companies referred to as “mutual funds” are open-end funds which can be seen using the Straddle Trader Pro 2.0.
The strength of a mutual fund is usually measured by the returns that it delivers to its investors. These returns are generated by the profit made from trading stocks rather than long-term ownership and the growth in value of a single company. This allows for greater profit potential but also involves significantly higher risk. There are funds that use a long-term strategy, holding stocks for years to bolster value. Hedge funds are not mutual funds. The Investment Company Act of 1940 does not govern them, although many hedge fund managers are required to register as an investment advisor.