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    Mutual Fund Basics

    Monday, December 7th, 2009 at 8:46 PM | Investing, Retirement, Stock Market

    mutualfundsA mutual fund is a perfect example of yet another simple concept, that has been expanded into a very complex part of personal finance.

    Basic Gist
    A mutual fund pools money together from thousands of small investors and then it’s manager buys stocks, bonds or other securities with it. When you contribute money to a fund, you get an ownership stake in all its investments.

    Major Benefit
    The major benefit of mutual funds
    is easy diversification. Only the very wealthiest investors could afford comparable diversification in regular company stocks. In addition you have a fund manager who is responsible for maintaining the assets and returns of the fund. I don’t know about you, but I like all the help I can get from professionals.

    Other Benefits
    Another benefit is your abilty to invest in relatively small chunks. Most mutual funds allow you to buy partial shares. So if $25 a week is all you have to invest, no problem. With such a small amount, you can still get the diversification and benefit that large investors get.

    Another benefit is the variety of types of funds. You will have a hard time finding a large public company that is centered around your specific needs as an investor. This is not the case with mutual funds. You can find a fund that fits your investment needs perfectly in most cases.

    How to Choose a Fund?
    Well the easy answer is to ask a qualified financial planner for recommendations. In many cases you will not have to pay anything to have a financial planner manage your funds. Also no load funds are great for starting out, because you can invest small amounts of money and not pay any fees.

    Here are a few places to learn more about mutual funds:

    Talking Point: What funds have you had good experience with, and how did you hear about them initially?

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    2 responses to “Mutual Fund Basics”

    1. Thanks for the very informative post. I have bookmarked the site.

    2. Wow, what a very informative piece! Thank you so much for your fantastic writing, i’ve bookmarked your site so I can stay up to date with your stuff.

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