Sign On
  • Online Banking
    Sign On Form is Loading

If you want to start investing, mutual funds are a great option to explore. But like any investment, you need to know what you're putting your money into before you begin. Here's what you should know about this particular type of fund in your investment portfolio.

What Is a Mutual Fund and How Does It Work?

Let's say you want to invest in the market. There are a little over 4,000 publicly traded companies in the U.S. stock market, meaning that you have over 4,000 options for which stocks to invest in — and that's just one type of asset in one country. You might also want to invest in bonds or commodities, or perhaps even diversify your portfolio by investing in global markets. Mutual funds make it easier for individual investors to get into the market and invest with less stress.

A mutual fund collects money from individuals, pools all of that money together, and then has a professional fund manager invest it on behalf of the group of individuals who had put their money into the mutual fund. The invested money is managed according to set goals, which means you can choose to invest in a fund with goals that align with your own financial objectives.

You can also choose between an open-end and closed-end mutual fund.

  • Closed-end Funds: These funds are publicly traded and have a set number of shares issued. They trade on an exchange and are more liquid than open-end funds; prices trade at a significant discount or premium to the NAV based on supply and demand throughout the trading day.
  • Open-end Funds: These funds do not have a restriction on the number of shares the fund can issue and aren't traded on exchanges. They are less liquid than closed-end funds, and are priced at the NAV at the trading day’s end.

Should You Use These Funds for Your Investments?

Most investors should consider mutual funds because it allows for an easy way to create a well-managed, diversified investment portfolio. The funds are managed by a professional, which means they take care of all of the decisions required to invest.

Mutual funds give you the ability to invest in specific market sectors (for example technology), or specific market indices (for example the S & P 500). Investors may want to consider mutual funds as part of a diversified investment portfolio.

Potential Facts to Consider

The convenience of professional management, the ability to easily diversify, and flexibility inherent in mutual funds are all great reasons to consider using these vehicles to build your investment portfolio. But there are some additional facts to be aware of before you make that decision. These funds come with fees for the professional managing service, and fees vary widely from fund to fund. Check out the expense ratio before investing in any mutual fund.

If the fund sells assets, it distributes any capital gains to the individuals invested in the fund. Investing this way could subject you to a less advantageous tax situation since you don't get to decide what or when the fund buys and sells assets.

For most investors, however, the pros tend to outweigh the cons. Mutual funds can offer a great way to start growing your finances in a way that's easy, accessible, and convenient. If you want to figure out what kind of fund would make the most sense for you, it may be time to reach out to a financial advisor who can look at your financial situation and make personalized recommendations.

Check in On Your Money

Spend 30 minutes with us. We’ll talk about your money realities and goals to give you personalized advice and ideas you can start using right away.

Schedule a Review

Investments in mutual funds involve risk, including possible loss of the principal amount invested. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; investor's shares, when redeemed, may be worth more or less than their original cost. You should consider the investment objectives, risks, and charges and expenses of the fund carefully before investing. A prospectus contains this and other information about the mutual fund. Read the prospectus pertaining to the investment company's mutual fund you are considering carefully before investing.

KeyBank and its affiliated entities do not give tax or legal advice. The comments regarding the law and tax treatment in this material simply reflect current interpretations of such laws. Since laws are always subject to interpretation and possible changes, KeyBank and its affiliates strongly recommend that you seek the counsel of an attorney and/or other qualified tax advisor as to the specific legal and tax consequences of all planning concepts as they apply to the facts of your particular situation.

Investment products offered through Key Investment Services LLC (KIS), member FINRA/SIPC and SEC-registered investment advisor.

Insurance products are offered through KeyCorp Insurance Agency USA, Inc. (KIA). KIS and KIA are affiliated with KeyBank National Association (KeyBank).

Investment and insurance products made available through KIS and KIA are:


KIS, KIA and KeyBank are separate entities, and when you buy or sell securities and insurance products you are doing business with KIS and/or KIA, and not KeyBank.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

By selecting any external link on, you will leave the KeyBank website and jump to an unaffiliated third-party website that may offer a different privacy policy and level of security. The third party is responsible for website content and system availability. KeyBank does not offer, endorse, recommend or guarantee any product or service available on that entity's website.

Call Us

1-800-KEY2YOU® (539-2968)

Clients using a TDD/TTY device:

Clients using a relay service:

Schedule an Appointment

Talk to a Branch Manager in your neighborhood.

Schedule an appointment now

Find a Branch or ATM