There are ways that conservative or aggressive investors can invest with ease and diversity. If you are planning for your retirement, a child's college, or for a vacation, here are tips to help you understand mutual funds.
If you are charting a financial plan for your retirement, a child’s college expenses, or merely a vacation in the Caribbean, there are ways to let your money work for you. Whether you choose the goal of aggressive growth or conservative income, let the pros help you. And since you should not put all your eggs in one basket, diversification is essential.
The answer is a mutual fund. A mutual fund is a diversified portfolio of stocks, bonds, and/or short-term money market instruments, managed by seasoned professionals. They are sold by shares, usually with a commission, and can be purchased through a stockbroker or directly through a mutual fund.
There are different types of mutual funds to buy depending on your investment objective. Some funds are designed for aggressive growth by buying and selling stocks of small companies just starting up, turnaround companies, and companies possibly targeted for buyouts. These may be risky stocks to buy on your own.
Some mutual funds are conservative, purchasing highly rated, blue chip, large capitalization stocks. Many of these companies have been around a long time, some even paying dividends. These corporations often provide essential goods, such as oil or food.
Others are specialized funds, such as those buying technological companies, environmentally-friendly stocks, or foreign firms. Still other mutual funds track popular stock indexes, such as the Dow Jones Industrial Average or the Standard & Poor 500 index.
Some investors prefer income mutual funds. These funds offer a portfolio of stocks, such as utilities, which pay a high dividend yield. Other funds offer a mix of corporate and/or government bonds with a sprinkling of short-term money market instruments yielding interest. There are even some mutual funds which combine utility stocks and bonds.
If you have a good broker who you trust, ask him for information about the type of mutual fund which would meet your investment objective. If you don’t, you may contact various mutual fund companies by phone or e-mail. Request a mutual fund prospectus for more details about the fund. A prospectus will tell you about the fund’s money managers, fees, financial highlights, historical performance, risks, longevity, and reputation.
Mutual funds are good investments for retirement plans, such as 401-Ks and IRAs. Most mutual fund families have various types of funds to offer the investor, like growth, income, foreign, tech, blue chip, money markets, and so forth. Once in the family, the investor may move between the various funds, depending on the objective. Plus, shares may be sold, if needed. Mutual fund prices are quoted every week day in major newspapers.
Mutual funds may be the ideal way for an investor to meet his objectives, whether it be growth, income, or liquidity. Although past performance is no guarantee of the future, there are many long-established, well-run funds which may meet your needs.
By ehow.com
No comments:
Post a Comment