Being Your Own Advisor
A mutual fund is a pooled investment. When you buy shares in a mutual fund, you are buying shares in a professionally managed portfolio of stocks, bonds, or other securities.
Investment managers are responsible for buying and selling securities according to specific investment objectives, which are identified in the prospectus. Buying shares of a mutual fund can give you built-in diversification. A single mutual fund holds many different securities. When you buy into a mutual fund, investment professionals manage your money. They carefully research, select, and supervise all the assets in the mutual fund. This frees you from having to select and track individual investments. When you invest in mutual funds, you get access to some of the finest investment minds on Wall Street.
Often, mutual funds belong to a "mutual fund family." You may be able to shift your investment among different types of mutual funds, often with no more than a phone call. That way your portfolio can easily be tailored to suit your financial situation and your expectations about the market. However, transfers among a fund family are considered sales, which may result in paying capital gains taxes if the fund being sold has appreciated.
Mutual funds make managing your portfolio very easy. Periodic statements will fill you in on the performance of your mutual fund, transactions within your account, and more. You'll also be kept informed about the taxability of your distributions.
When one security in a fund drops, an insightful fund manager may have included stocks that could cushion or offset that loss. Diversification is a big selling factor for mutual funds; there is, in fact, relative safety in numbers. But that's not to say that an investor couldn't diversify via his own stock selections. Remember that diversification cannot eliminate or guarantee against the risk of investment loss; it is a method used to help manage investment risk.
Growth and income funds attempt to achieve both long-term growth and current income. They invest primarily in high-yield common stock, preferred stock, and convertible debt (bonds) to generate both growth and income. Because they include a mix of investments, these funds are typically less risky than growth funds.
International and global mutual funds offer diversification into international stock markets. International funds invest only in foreign securities. Global funds, on the other hand, can invest in foreign and U.S. securities. The additional risks associated with investing on a worldwide basis include differences in regulation of financial data and reporting, currency exchange differences, as well as economic and political systems that may be different that those in the United States.
Sector funds invest in specific industries or sectors of the economy, such as communications, aerospace and defense, or health care. While they may be diversified within a particular sector, they lack broad diversification. This increases their investment risk. These funds typically seek long-term capital appreciation.
Article Source: FxTradingStock.com
About the Author
Internet information with Online Sources and World News
by: Brandon T. McMillian
Total views: 32
Word Count: 491
Date: Tue, 25 Jan 2011
Publish/Share this article
To use this article on your site click here to get the HTML code
Rating: Not yet rated
Login to vote
Related Articles
How to Invest in 2011 and Beyond Without a ClueWhat Is Forex Trading?
Quick Way To Trade In Shares
ATM Calendar Spreads, Are You Aware Of The Hidden Gotchas?
Emini Day Trading Requirements
The Coming Death Of The Dollar
Fantastic Fundraising Suggestions
Winning Big In The Share Market
