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By Nick Heckman
MoneyMix Contributor

Your bills are all paid on time this month and you have some spare cash lying around. Last time this happened, you took a trip to Vegas— and we all remember how that turned out. If you’re looking for a new way to make some extra income then think about mutual funds.

the money pool

Think of buying mutual fund shares as "co-operative investing."Remember the saying that "you’ve got to spend money to make money?" Mutual funds, like all investments, are the perfect example of this idea in action. They’re kind of like buying stocks, except that instead of using one person’s money a mutual fund pools your money with a group of fellow investors and uses it to buy stocks, bonds, and other securities.

    Closed-end fund--Resembles stock in the way it is traded. It raises money only once and offers only a fixed number of shares that are traded on an exchange or over the counter. A closed-end fund's price fluctuates with the market, regardless of the prices of the stocks it owns.

    Open-end fund--Continues investing in its holdings as long as investors keep contributing. It redeems shares of the companies it invests in if investors choose to take their money back.  Most mutual funds are open-end.

Think of it as "co-operative investing." You share in the fund’s gains, losses, and expenses based on how much you put in. While you might not make as much as if you invested by yourself, your potential losses will also decrease. In other words, there’s a smaller risk.

Look at the trends to decide which fund is for you. Chad Winklepleck, an investment representative with Edward Jones says, "Investors should invest in mutual funds that have a proven track record in both up markets and down markets." Even though what happened in the past can't guarantee anything for the future, this will give you a good idea of how your fund will perform and whether or not you're investing wisely.

Mutual funds are legally known as "open-ended companies." This means that at the end of every day, the fund will both continue to invest in holdings for

contributing investors and buy back shares from investors that want to leave. In other words, you can get out of a mutual fund whenever you want and take your profits with you.