The Discretionary Dollar

A 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:

• Investing in Mutual Funds | CNN Money 101
• Funds 101 | MSN Money
• Mutual Funds | Wikipedia

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

This entry was posted on Monday, December 7th, 2009 at 8:46 PM and is filed under Investing, Retirement, Stock Market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.