"How Mutual Funds Work" outlines the stock market, the bond market, asset allocation, index funds, variable annuities, tax considerations, and the role of computers. Fredman and Wiles provide a Q&A section with the 100 most important questions and their easily digested brief answers.
"The basic idea of how mutual funds work is straightforward. Investors pool their money and hire a portfolio manager to invest in a variety of investment securities. When an investor buys a mutual fund, their investment dollars are used to purchase new shares of the mutual fund. In other words, shares of the mutual fund are created for the new investor, these new shares are issued to the new investor, and the new investor’s dollars are combined with dollars of the other mutual fund holders.
The manager of the fund, called the portfolio manager, then buys investments according to the objective of the fund. The fund’s prospectus will inform investors of the fund’s objectives.
Albert J. Fredman
Albert J. Fredman is an adjunct professor of Finance at USDs School of Business Administration, where he has taught since September 2003. Prior to joining USDs faculty, Professor Fredman taught for many years in the Finance Department of California State University, Fullerton, where he is now Professor of Finance, emeritus. Earlier in his career, he taught finance at Loyola University of Chicago, the University of Wisconsin-Milwaukee, and the University of Arizona. He holds a PhD in finance from UCLA, an MBA from UCLA, and an undergraduate degree in accounting from San Diego State University. A nationally recognized authority on closed-end funds and mutual funds, Professor Fredman has co-authored four books on investment companies as well as academic articles in the investments field. He wrote a popular mutual fund column for the AAII Journal for more than 10 years. He has been quoted in many periodicals, including The Wall Street Journal and The New York Times. His teaching interests include bank management, corporate finance, economics, investments, and capital and money markets.
Russ Wiler is a financial writer/columnist for the Arizona Republic, whose weekly column also appears in the Los Angeles Times, the Chicago Tribune, and The Hartford Courant.