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The Real Poop

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See: Financial Analyst, Hedge Fund Manager

If you work in the investment section of a mutual fund, that's pretty much what you'll do all day for starters. If you're too lazy to click, the quick summary is that you will meet with company management, go to conferences and listen to their propogand...er, information/presentations, and then you'll make financial models which estimate future earnings. Usually based on those estimates, you'll make investments to capture growth in stock prices. Your goal is to be the kind of fortune-teller who can make someone else a fortune.

Note that we only say "growth" here—mutual funds, unlike hedge funds, can't short stocks (make bets that they will go down). Mutual funds can only sell stocks and bonds when they think they are headed south. And mutual funds can't use options either. They are "vanilla"—they can only buy and sell and that's it. And they taste delicious with hot fudge sauce and a maraschino cherry.

We gained weight just looking at this picture.

Mutual funds usually have three divisions in the investment area—financial analysts who report in to sell ideas to portfolio managers; portfolio managers who make the buy and sell decisions; and an economics department which opines on—what else?—the economy.  

Economists don't invest—they philosophize—but inside of a mutual fund, economists are the gurus who give broader market, which affects bond prices more than anything else. 

Importantly, Mutual funds don't just do stocks—they also do bonds government paper, preferred stocks, and other broad vehicles that Joe Investor wants to buy.

But there are many other divisions to a mutual fund company. Mutual funds are regulated and must conform to all kinds of legal and compliance issues, from reporting to communications to customer service minimums. So there are entire departments inside of mutual funds that handle these complex functions.

No—even more complex than these.

And mutual funds are bought and sold by brokers. So there is almost always someone who runs "distribution," a fancy term for "raising money" for the mutual fund to manager. And in most cases it is, in fact, the mutual fund distribution company, which owns the mutual fund. They effectively hire (and could, in theory, fire) the people who manage the money. At least your walking papers would have pictures of dead presidents on them.

All of this is done for a small (?) fee of about 1% per year.