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Mutual Funds Education

Learn about investing in mutual funds

Understand the basics of mutual funds

What are mutual funds?

Mutual funds use money from investors to purchase stocks, bonds and other assets. You can think of them as ready-made portfolios, and with their diverse holdings, mutual funds can help you diversify your own portfolio more easily.Footnote 1 As the fund's investments gain or lose value, you gain or lose as well, and when they pay dividends.

What are the different types of mutual funds I can invest in?

Equity Funds

An equity fund (stock fund) is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes or other securities.

Fixed Income Funds

Fixed income funds are funds that emphasize income generation by investing at least 80% of their assets in debt issues, preferred and/or convertible securities.

Money Market Funds

A money market fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These instruments include cash and cash equivalent.

Balanced Funds

Balanced funds are funds whose primary objective is to maintain a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%.

Target Date Funds

Target Date Funds are designed to be long-term investments for individuals with a specific retirement or selling date in mind. They automatically rebalance and gradually shift an investor's asset allocation toward lower-risk investments as the target date approaches.

Index Funds

Index Funds offer clients returns that are based on the changes in the value of the market index to watch a particular fund is linked. Some examples of commonly tracked indexes are the S&P 500 and the Russell 2000.

Common questions about mutual funds

If you're looking for more information, check out these responses to some of the common questions investors have about mutual funds

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Footnote 
Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Diversification does not ensure profit or protect against loss in declining markets.
The target date (or retirement date, as applicable) for these funds is the approximate date when an investor plans to start withdrawing the assets from their retirement account. The principal value of these funds is not guaranteed at any time, including at the target date. These funds are designed to become more conservative over time as the target date approaches.

Merrill Edge Select® Funds meet a proprietary screening process developed by the Chief Investment Office (CIO) of Merrill. The listing contains no-load funds with no transaction fees and load-waived funds that are open for new and subsequent purchases. Available funds have a minimum initial investment of no more than $3,000. Each fund must have $100 million or greater ($500 million for Large Cap funds) in assets under management across all share classes offered by the fund. Note that index funds are not included in Merrill Edge Select® Funds. To learn more about the Merrill Edge Select® Funds methodology go to merrilledge.com/MESFunds

When you purchase No Load, No Transaction Fee funds (NTF) or Load Waived funds, you will not pay loads, transaction fees or commissions. A Merrill Edge short term redemption fee of $39.95 is charged on redemptions or exchanges of NTF funds that are held less than 90 days. There are costs associated with owning a mutual fund, such as annual operating fees and expenses. For more information about investing in mutual funds at Merrill, please read the Mutual Fund Investing at Merrill Lynch pamphlet at ml.com/funds.

No investment plan is risk free, and a systematic investment plan does not ensure profits or protect against losses. This program is recommended for long-term investing in mutual funds. Since Automatic Investment Plans (AIPs) involve continual investment in securities regardless of fluctuating prices, you should consider your financial ability to continue investing through periods of low price levels. Your AIP purchases may be on margin. Borrowing on margin and using securities as collateral involves certain risks. Margin is not appropriate for all investors. Please refer to your Margin Agreement which outlines the risks associated with borrowing on margin.

Footnote 
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").
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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF).

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp").
Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.

Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
Are Not Deposits Are Not Insured by Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity


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