By combining their resources, mutual funds enable small investors to participate in investments in broad portfolios. This is done by putting money into a pool of funds with lots of investors, whose combined contributions add up to a lot, making it possible for people with little financial resources to diversify their portfolios. Investment firms that go by the name of mutual funds typically manage the money that members contribute. The fund managers periodically disperse income from capital gains, dividends, and interest payments. The returns on mutual fund investments are typically net of the fund managers' fees.

1) A mutual fund that only invests in bonds is known as a bond fund.

2) A fund known as an equity fund only invests in stocks.

3) The expense ratio measures the proportion of the fund's total net assets to its total expenses.

4) The average profit rate over a three-year period is known as the three-year performance (Rate of Return). The average rate of return in the fund's most recent fiscal year is what is meant by its one-year performance.