How Do I Invest Purchase Shares in a Mutual Fund?
- 1). Open a brokerage account through a bank, financial services firm or online discount broker. Seek recommendations from family and friends, or from professionals such as tax advisers or insurance agents.
- 2). Research the fund you are interested in purchasing. Obtain a prospectus from the mutual fund company from its website, by calling the investor relations department or requesting a copy from your brokerage firm. The prospectus reviews the investment objective of the fund, the types of securities it purchases, historical performance and the expenses associated with the fund. Check mutual fund rating sites, such as Morningstar.com, which provide a wealth of information and recommendations.
- 3). There are two basic types of mutual funds: an open-end fund and a closed-end fund. Open-end funds create and eliminate shares when an investor buys or redeems shares. A closed-end fund has a finite set of shares and trades on the exchange like a stock. Open-end funds generate earnings based on buying and selling securities within the fund and the pure appreciation of the stocks held in the fund. Closed-end funds appreciate in the same manner but their prices are also affected by the supply of and demand for the shares.
- 4). Place an order to buy the fund with your brokerage firm by phone or via online brokerage account. Obtain a confirmation number for the transaction.
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