Quote:
Originally Posted by headpunter
the best way i can think to describe a mutual fund is it is a stock you can buy. buying this stock is like putting money in the pot of the mutual fund and it gives you portions of many different stocks. its kinda like buying alot of smaller portions of stocks.
so like in one of the mutual funds i recently divested from, The manager had bought GM, WalMart, Home Depot, Best Buy, and many other companies. so my one stock in the Mutual fund was worth a small portion of a stock in each of those companies.
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Yeah, I understand that part of it. I guess what I don't understand is how they make money by doing that. Are they constantly buying and selling many stocks making profit and you receive the dividends....or.....when you buy into a mutual fund you bought into all of those companies and those shares just sit around until you decide to sell....then you receive your profit. I guess that is what confuses me.
Is that confusing?