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Finance
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Investing
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Mutual Funds
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How investing in mutual funds can cost you money
Whether you call it a fee, a charge or an expense, there is a whole list of ways that actively managed mutual funds can separate you from your money. Here are the primary means by which your assets can be reduced:
Mutual funds - Better than individual stocks and bonds?
Of course, there's never one answer for everyone, but in general, investing in a mutual fund is better for most people - certainly the average investor - than buying individual equities and bonds. With a mutual fund, you get:
Bond mutual funds guide
Unless you have some big bucks to throw at the market, building a diversified portfolio of bonds could be financially prohibitive. But a bond mutual fund gives a smaller investor an opportunity to become a shareholder in a diversified portfolio of bonds. You can invest in bond funds with as little as $500 to $1000 and get instant diversification and professional management.
Getting started in mutual funds
Mutual funds are investment companies that take in funds from many individuals, commingle the money, and a portfolio of stocks (or bonds or other investments) that they manage. Mutual funds provide a way for investors with limited dollars - many mutual funds have minimum investments of $2,500 or less - to have portfolio diversification as well as professional money management.
Going global through mutual funds
There are more than 13500 different publicly traded companies in the world today, and there are over 700 more companies expected to go public within a year. In addition, every major developed country offers investors various bonds to invest in. All of this makes for a lot of different investments and plenty of choice. Investors can take advantage of this choice through a good global balanced fund that invests in bonds and stocks or a global equity fund that invests in stocks all around the world.
Market timing with your mutual funds
When investing in bonds, stocks, or mutual funds, investors have the opportunity to increase their rate of return by timing the market - investing when stock markets go up and selling before they decline. A good investor can either time the market prudently, select a good investment, or employ a combination of both to increase his or her rate of return. However, any attempt to increase your rate of return by timing the market entails higher risk. Investors who actively try to time the market should realize that sometimes the unexpected does happen and they could lose money or forgo an excellent return.
How to select a mutual fund
One of the most common ways of selecting a mutual fund is to invest with the crowd in today's hot funds. Unfortunately, jumping from one winning fund to another is a recipe for disaster. The mutual funds that the crowd follows typically have had a hot recent performance and tend to gather all the new mutual fund sales.
Mutual funds: protect yourself with segregated funds
Segregated funds were initially developed by the insurance industry to compete against mutual funds. Today, many mutual fund companies are in partnership with insurance companies to offer segregated funds to investors. Segregated funds offer some unique benefits not available to mutual fund investors.
Mutual funds are not investments
Mutual funds simply are a method through which people invest. People often asking, "What are mutual funds paying?" The truth is that mutual funds don't pay anything! People also say, "I don't like mutual funds because they're risky." But there's no such thing as a "risky" fund. Nor has anyone ever lost money in a mutual fund. Mutual funds are not good, and they're not bad.
The Skinny on Mutual Fund Investing
Mutual fund investing is a lot like Thai cooking. Everyone has heard of it, most know a little something about it, but very few actually know how to do it and do it well. To invest in mutual funds wisely, it is important to have a good grasp on what mutual funds are, how they work, and what the risks involved may be. The fact that mutual fund investments are often considered safer than stocks, options, and other investments often misleads people to think that their investment in mutual funds are risk free. This, as you will see, is not the case.
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