Companies often use different share classes, like Class A or Class B, to structure ownership

Share classes refer to specific types of company stock that are distinguished by the rights they grant, such as voting power and dividend access.

Mutual funds come with a few associated fees.

Mutual funds are categorized as stock, bond, money market, and target-date funds.

Mutual funds pool money to create larger investment opportunities with higher returns for anyone who initially invests in the fund.

Investing in mutual funds can give you access to a wide range of securities, such as stocks and bonds, with just a single investment.

Mutual fund investors typically must pay a variety of different types of taxes associated with their investment, unless the funds are within tax-advantaged accounts like a 401(k) or IRA.

How mutual funds work

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

Read about the pros and cons of mutual funds.

Mutual funds invest in multiple different companies with money from many investors, while an individual stock invests in one company with funds from a single investor.

Open-end and closed-end mutual funds differ in how they create and distribute shares.

Figure out what type of mutual fund is right for you with a tool that lets you compare different mutual funds, from rates to returns.

ETFs and mutual funds both pool money into a basket of investments—but the key difference between them is that mutual funds trade just once per day after the market closes, while ETFs trade like stocks throughout the day at fluctuating prices.

Contrary to popular belief, random investments can outperform managed funds.

The term 'securities' refers to different types of investments, such as stocks or bonds.

Index funds are typically structured as either mutual funds or exchange-traded funds, but investors can manually recreate an index through 'direct indexing.'

Mutual funds in seven broad categories averaged a 13.1% annual return in 2023.

The 'Big Three' asset managers—Vanguard, State Street, and BlackRock—collectively manage more than $30T in assets and are the largest shareholders in roughly 88% of all the companies listed on the S&P 500.

Mutual funds were first created and sold in the US in 1924.

Explore a list of the world's largest mutual funds.

Investors can buy three main types of bonds: government, corporate, and municipal

Each type has variations of its bond offerings with different interest rates, loan lengths, maturity dates, and terms. Each type also carries its own risks and rewards.

Test your ETF knowledge

A 10-question quiz from the SEC allows investors to test their basic knowledge about exchange-traded funds and their investing counterparts, mutual funds. Here’s a sample question: Is the past performance of a fund a good indicator of future results? (Hint, the answer is no).

ETFs and mutual funds are both taxed on capital gains and on dividends.

The price of a mutual fund is based on its net asset value (or NAV).

Hedge funds make money from imposing steep fees on investors, as well as from investment performance

Hedge funds often operate on a "2 and 20" model: Investors pay fund managers a 2% management fee, and the hedge fund keeps 20% of their profits. (The 2% is imposed annually, irrespective of performance.) Hedge funds are known for chasing big returns—and taking big risks to get them. This explainer not only breaks down how they work in detail, but also the strategy first introduced in 1949 that still shapes hedge fund investing today.

Retail investors are average joes, while institutional investors often move billions of dollars a day

Retail investors often trade 100 shares at a time, while institutional investors trade 10,000 or more. The biggest difference is that, unlike retail investors, institutional investors are professionals who are trading someone else’s money.

Alternative investments can be sorted into seven major categories, according to some experts

These categories include real estate, private equity, private debt, hedge funds, collectibles, and more.

Shares are parts of a stock that represent ownership of a company

Shares are traded on the stock market. Once you buy a single share of a company, you are considered a shareholder of that company and may have certain rights as a partial owner, such as voting on business decisions.

Not all alternative investments are easy to invest in

For instance, some alternative investments are only available to accredited investors or high-net-worth individuals. Others have relatively high fees compared to traditional investments.

Retail investors are individuals who trade stock for themselves

Institutional investors, on the other hand, are investing for someone else. There are big differences between the two, one being that institutional investors can be granted certain special treatment (like being able to purchase IPOs right away).

Angel investors often come together as a syndicate

Startups raise money in different rounds from investors that include their friends and family, angels, and venture capital funds. These types of investors serve different purposes.

Dual-class stock structures separate equity and decision-making authority

In the past few decades, dual-class stock structures have become an increasingly popular way for companies to raise capital in public markets without allocating traditional shareholder voting rights. Meta, Estée Lauder, and The New York Times are companies that are famously dual-class.

90 percent of active managers of large public funds underperform

High fees tend to eat away at whatever edge professional managers accrue, resulting in most such funds performing worse than their underlying benchmark indexes like the S&P 500.

One $100 investment in the Medallion Fund skyrockets over time

The Medallion Fund, the famously secretive quant fund that invests billions of dollars for the partners and employees of a single firm with a legendary track record, has trounced the market for more than three decades. While its results are an extreme outlier, this visualization showcases the power of compound interest.

Explore the differences between private equity, venture capital, and hedge funds

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

A bond ETF lets someone invest in multiple bonds through one single fund

There are risks, there are also major perks to buying a bond ETF, like the ability to purchase bonds on the stock market.

People often invest in alternative investments to diversify their portfolios

Because alternatives often have little correlation with traditional investments like stocks and bonds, adding them to a traditional portfolio can reduce its overall risk exposure.