Don't want to mess around with individual stocks or bonds?
Don't have much money to invest?
You want diversification and professional management?
Seeking price appreciation or income?
Mutual funds can provide the answer!
Whether you're interested in stocks, bonds, government securities, international securities, foreign currencies or options. Some have no minimum initial investment requirements, while others require a modest outlay. This gives you access to the market and a chance to add to your holdings in small increments.
Everybody in the pool!
Mutual funds are investment companies that raise money from shareholders to pool it for the purpose of investing in many securities. Because they can buy and sell large blocks, their brokerage costs are lower than commissions paid by individuals.
Mutual fund companies have professional management, with a portfolio manager to monitor its holdings and decide which to buy, hold or sell. Shares are sold to the public at net asset value (NAV) price. How well your fund does will make the difference between a rising or declining NAV.
Every mutual fund publishes a prospectus that states its investment goal, investments (such as stocks or bonds) that it purchases, past performance, name of the fund manager, fees and how it derives its returns. A potential investor should also examine the annual and semiannual shareholder reports.
Another type of fund, known as an index fund, doesn't try to beat the performance of the overall market,but tries to equal it. Its manager buys a portfolio that is a mirror image of an index. Through many periods, these funds outperform the majority of active fund managers.
Putting a fund through its paces.
When examining a mutual fund's performance, look for consistency of returns year after year. Buying the top funds of the prior year can often be a dismal failure, since high flyers often come crashing down to earth.
Tolerable risk and low expenses?
Investing in mutual funds requires homework, setting goals, selecting appropriate funds and hanging in there for the long haul.
Daily returns are published in the newspapers. It's easy to determine whether your carefully chosen funds are winning or losing the investment game.