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Instead of keeping track of all your stocks, bonds, and other
holdings, you can buy shares in a mutual fund and let a professional manager do
it for you. Mutual fund managers run their funds in exchange for a small fee
from investors. They choose investments for their fund based on the fund's
objectives. They watch the market, analyze the movements of promising
securities, and then decide on which investments to buy or sell for their fund.
To help them make decisions, the managers have access to a broad range of
research that the average investor would not have the time or desire to
fees that are charged to compensate those who run the fund's portfolio are
called management fees.
They rarely exceed one percent of the fund's assets.
Those who do not have the time or inclination to actively
trade their investments on the market have a simpler approach in mutual funds.
You will learn about this in the next section.