What is a Mutual Fund?

A mutual fund is a corporation which pools together investor's money to purchase securities. Investors of mutual funds receive shares of the entire pool of assets, thereby diversifying their investment. The pooled assets are managed by professionals who buy and sell securities according to the objective of the fund.

  What is the difference between a closed-end and an open-end fund?

A closed-end fund has a fixed number of shares outstanding, and is traded in a similar way to stocks. Open-end funds, which are much more common, sell and redeem shares at any time directly to shareholders. Sales and redemption prices for open-end funds are fixed based on the fund's net asset value (NAV). The more investors purchasing a fund, the higher its net assets, but per share prices will remain the same; on the other hand, since closed-end funds are traded on the market, it can be priced at a premium or discount, depending on demand as well as performance.

  What is the commission Firstrade charges for buying Mutual Funds?

Mutual fund transaction is commission free. A Short Term Redemption Fee of $19.95 will be applied to redemptions of mutual fund shares held less than 90 days. Broker-Assisted redemptions will incur a charge of $19.95. Redemptions of less than $500 will incur a $19.95 fee, unless the entire value of that fund is less than $500. For mutual funds transferred to Firstrade, the 90 day holding period will begin when the account transfer process is complete.

  A mutual fund had great returns last year, is it going to receive the same returns this year?

A mutual fund is not a fixed income product, the performance of a fund is based on the performance of the assets held by the fund. If the assets of the fund's portfolio decline in value, the mutual fund investment also loses value. While the previous year's performance is an indicator of the quality of the fund's management, it is not a guarantee of future returns. Investors should perform sufficient mutual fund research before making an investment decision to buy mutual funds.

  How can I set up periodic investments?

You can take advantage of "dollar cost averaging" by having Firstrade purchase mutual funds for you at a predetermined time interval. To sign up for periodic investments, complete and mail this form.

  Are there risks involved in Mutual Fund investments?

While considered less risky than stocks, there is still a chance you will get back less than your original investment as a result of a declining NAV for the fund, or sales charges associated with purchasing the fund.

  How do I choose the right mutual fund for me?

Every mutual fund has a different objective, some aim for aggressive growth, others emphasize income by investing in bonds or preferred stocks, while others maintain a balanced portfolio by investing across the stock, bond, and money markets. With so many different funds to choose from, use our mutual fund research and you will surely find a fund that will suit your investment needs.

  Can I purchase mutual funds for my IRA account?

Yes, you can purchase any mutual funds through your IRA account.

  What is a prospectus?

A prospectus is a document that contains detailed information on a particular mutual fund. It must be provided to all shareholders of open-end funds and newly-issued closed-end funds.

  Can some shares of a fund in my portfolio pay out dividends in cash and the rest have dividends reinvested?

No. All the shares in one mutual fund must either be coded to pay out dividends in cash or all the shares must be coded to reinvest the dividends in the fund. If you purchase multiple lots of the same fund, the instructions given for the last purchase will be used for the entire lot. The same holds true for capital gains.

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