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Mutual Funds

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Investing in Mutual Funds

Mutual funds are investments held by a number of different people. Investors pool their money together and entrust it to a professional money manager who buys and sells securities based on the fund's objective. A fund may be comprised of stocks, bonds, cash, property, or any combination of these.

You purchase "shares" in a mutual fund, just as you do with individual stock. However, mutual funds are diversified - holding shares in a greater number of securities than any single investor is likely to buy on their own. The mutual fund's shareholders share the costs of buying the investments, and they also share in the proceeds from the fund's growth.

Mutual (or managed) funds are a great option if you are uncertain about what stock or bond to invest in. The fund gives you security in diversification and the knowledge that the fund is being managed by a professional.

However, managed funds are equally susceptible to the volatility of the global market (although less susceptible to the risk of a single company not performing) and there are fees associated with paying the professional fund manager.

And of course there are different types of funds too – again, depending on your risk tolerance and objectives. Funds can be:

  • Money-Market Funds – essentially a cash fund, so low risk and low return.
  • Bond Funds – the fund invests in bonds and securities that pay both dividends and interest.
  • Stock Funds – these funds invest in a diverse range of stocks. Funds can focus on growth stocks, value stocks or a balanced portfolio of stocks. Stock funds can be aggressive high risk (high return) funds or may invest in a more conservative portfolio depending on your objectives.
  • Balanced Funds – divide investments between stock, bond, cash and even property investments. Balanced funds are typically low risk, with a moderate return.
  • International and Global Funds – these funds invest in foreign funds and securities as well as securities at –home.
  • Specialized Funds - Concentrate on a particular industry or country.
Once again the important thing is to do your research before you invest in any fund – understand the risks, the likely returns and the period of investment. – and make sure these fit in with your personal investment goals.
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We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.

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