"Many people make the mistake of thinking that mutual funds are a kind of investment; instead they are a way of investing," explains Walden, a professor in the College of Agriculture and Life Sciences.

"What happens with a mutual fund is many people pool their money together. Essentially they are hiring a professional manager who then goes out and picks the particular type of investments.

"The benefit is, presumably, you get the benefit of a professional manager," he says. "Also because a lot of money is being pulled together, you can diversify your investments more.

"But the main thing that you want to look for first of all in a mutual fund is where, ultimately, does your money go?" Walden adds. "Because it’s going to have to go somewhere like stocks, bonds, cash or inflation hedges. It’s going to have to go to one of those four major categories.

"And you want to look at the prospectus of the mutual fund; it will tell you ultimately where your money goes."