Do You Know These Mutual Fund Basics?
Even during the economic downturn, mutual funds continue to be popular as investments, since they make it relatively easier to get into the market. But do you know the mutual fund basics before you invest in these vehicles? Even though mutual funds have been pitched to investors as no-brainer places to stash your cash, the results of the past year demonstrate that getting good returns is never easy.
Mutual funds are everywhere, too - there are more than 10,000 different funds, and they've together amassed more than $4 trillion in investments! If you want to profit through mutual fund investing, you need to kow the basics and whether they are truly "safe".
Mutual funds have been popular as a result of great returns over part of the last few decades. Up until 2008, these vehicles were thought to provide diversification, safety and solid returns for the long run. They are easy to buy and sell, and have been thought to be less risky than other investments.
As a mutual fund is set up, the fund raises investment cash from investors, then uses that money to invest in stocks, bonds, and other securities that are a proper fit for the objective of the fund. Within the fund there is nearly always than a single individual investment. When the value of those investments goes up, or goes down for that matter, its investors also see a gain or a loss. When a fund pays out a dividend to shareholders, the investors get their fair share too. In addition, you can find that funds are well managed by professional advisors.
Mutual funds are designed as special types of corporations, which are allowed by charter to combine funds receied form investors, and invest that pool os cash for the whole group, based on the defined objectives of the fund. To raise investment capital there is an offering of shares of the fund to be sold to the general public, just as any public company wolud seek to sell stock on the market. Then the funds take the proceeds from selling shares and use it to purchase a variety of investments, such as stocks, bonds, derivatives, or money market instruments.
Shareholders investing in shares of the fund receive a proportional share position in the mutual fund. Literally the shareholders each have ownership of a piece of the securities within the fund. Generally speaking, shareholders are permitted to freely sell any fund shares they own at any time, with the price to be determined by the daily price fluctuations in the share price, based on the performance of the investments.
Some investors decide which mutual fund to choose based only on the performance of the fund or fund family within the past year or so. Some get their ideas from tips from a friend, co-worker or family member. Or, some buyers could be influenced by something they read in a magazine or on the Web. While these methods might result in buying a good fund, they are far from a sure thing. Actually, this is also a risky way to choose an investment, of any kind. Without any analysis of the fund's characteristics, it's hard to know if the fund is a good buy for that particular investor.
Note that every mutual fund has individual characteristics that are unique to it, such things as the performance, the personalities of the management, what the fund's investment objectives are and so on. When choosing a mutual fund, it's better to also consider your own financial plan overall, to see if the fund fits your own objectives. Start by defining your personal financial goals first, and address your financial priorities, the amount of money you have available, and the level of risk you are comfortable with. Put down also in your plan the time line you expect your strategy to bear fruit.
Everyone likes to talk about the super star funds, the high fliers that had double digit annual returns, to which everyone flocked with their cash. Today, we are a bit more realistic, and know that what comes up, can easily come down again. So, hopefully, you've learned that the performance of a fund is not the most important metric. Instead, examine the returns in the perspective of the underlying investments, and whether they are good long term investments. Don't forget that past performance is never any guarantee of future results. Start out by looking at other mutual funds on the market which are in categories that match your overall strategy, whether it be bond funds, growth funds, equity income funds, etc.
By learning more about mutual fund basics like there, you are helping to minimize your loss in the market, by knowing more about what exactly you're holding. Use these ideas to analyze which investments, if any, will lay the strongest part of your investment foundation. - 23200
Mutual funds are everywhere, too - there are more than 10,000 different funds, and they've together amassed more than $4 trillion in investments! If you want to profit through mutual fund investing, you need to kow the basics and whether they are truly "safe".
Mutual funds have been popular as a result of great returns over part of the last few decades. Up until 2008, these vehicles were thought to provide diversification, safety and solid returns for the long run. They are easy to buy and sell, and have been thought to be less risky than other investments.
As a mutual fund is set up, the fund raises investment cash from investors, then uses that money to invest in stocks, bonds, and other securities that are a proper fit for the objective of the fund. Within the fund there is nearly always than a single individual investment. When the value of those investments goes up, or goes down for that matter, its investors also see a gain or a loss. When a fund pays out a dividend to shareholders, the investors get their fair share too. In addition, you can find that funds are well managed by professional advisors.
Mutual funds are designed as special types of corporations, which are allowed by charter to combine funds receied form investors, and invest that pool os cash for the whole group, based on the defined objectives of the fund. To raise investment capital there is an offering of shares of the fund to be sold to the general public, just as any public company wolud seek to sell stock on the market. Then the funds take the proceeds from selling shares and use it to purchase a variety of investments, such as stocks, bonds, derivatives, or money market instruments.
Shareholders investing in shares of the fund receive a proportional share position in the mutual fund. Literally the shareholders each have ownership of a piece of the securities within the fund. Generally speaking, shareholders are permitted to freely sell any fund shares they own at any time, with the price to be determined by the daily price fluctuations in the share price, based on the performance of the investments.
Some investors decide which mutual fund to choose based only on the performance of the fund or fund family within the past year or so. Some get their ideas from tips from a friend, co-worker or family member. Or, some buyers could be influenced by something they read in a magazine or on the Web. While these methods might result in buying a good fund, they are far from a sure thing. Actually, this is also a risky way to choose an investment, of any kind. Without any analysis of the fund's characteristics, it's hard to know if the fund is a good buy for that particular investor.
Note that every mutual fund has individual characteristics that are unique to it, such things as the performance, the personalities of the management, what the fund's investment objectives are and so on. When choosing a mutual fund, it's better to also consider your own financial plan overall, to see if the fund fits your own objectives. Start by defining your personal financial goals first, and address your financial priorities, the amount of money you have available, and the level of risk you are comfortable with. Put down also in your plan the time line you expect your strategy to bear fruit.
Everyone likes to talk about the super star funds, the high fliers that had double digit annual returns, to which everyone flocked with their cash. Today, we are a bit more realistic, and know that what comes up, can easily come down again. So, hopefully, you've learned that the performance of a fund is not the most important metric. Instead, examine the returns in the perspective of the underlying investments, and whether they are good long term investments. Don't forget that past performance is never any guarantee of future results. Start out by looking at other mutual funds on the market which are in categories that match your overall strategy, whether it be bond funds, growth funds, equity income funds, etc.
By learning more about mutual fund basics like there, you are helping to minimize your loss in the market, by knowing more about what exactly you're holding. Use these ideas to analyze which investments, if any, will lay the strongest part of your investment foundation. - 23200
About the Author:
Looking for the best way to invest money in a down market? Jane Calhoun writes about how to invest in mutual funds in today's investment climate.
posted by X - Men @ 6:16 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home