Introduction To Mutual Fund Investing
If you are new to investing, you may have heard of mutual funds but do not know exactly what they are or how to select the right one. A mutual fund is a collective investment security, and there are many different types. It may consist of a mix of several different types of investment vehicles, such as stocks, bonds, or derivatives, or it may consist of nothing but stocks that are part of a certain sector of the economy, or it could be just bonds.
For example, there are mutual funds that consist of nothing but technology stocks. There are also funds that are comprised of stocks that have a similar market capitalization (such as mid-cap funds, large-cap funds, or small-cap funds). And some might contain several different types of securities (such as stocks, bonds, etc.) that all fall within the same risk classification (high-risk, medium-risk, low-risk).
Just like stocks, mutual funds have a price per share, also known as the Net Asset Value (NAV). The NAV is calculated by dividing the total value of the fund divided by the number of shares outstanding. As with stocks, the price fluctuates on a daily basis and it can be sold just like any other security.
When deciding what fund to invest in, you need to consider your investment goals. Are you looking for long-term capital appreciation, or would you prefer to receive immediate income from your investment? You also need to evaluate your risk tolerance. Are you willing to take a chance on a speculative fund to potentially receive a better return, or is capital preservation a high priority?
If capital preservation is your goal, then you should consider a mutual fund that consists of low risk equities and conservative bond and money market instruments. If you want a mix of investments, then you should look for a balanced fund. If you want explosive capital appreciation, then you should consider a high-risk common stock or high-yielding bond fund.
They are different than stocks when it comes to fees and expenses. As with stocks, funds are subject to capital gains taxes. But a fund is sometimes subject to a front-end and/or back-end load. If there is a front-end load, that means that a percentage of the initial investment is automatically deducted to pay for commissions to the fund. If there is a back-end load, the investor must pay a fee when the security is sold.
Also, there is a 12b-1 fee that is often deducted to pay for advertising expenses incurred for the marketing of the fund to the public. Sometimes there is no 12b-1 fee, it depends. Investors might be unaware of the 12b-1 fee because it is sometimes deducted from the share price, so in a way, it is an invisible fee.
I hope this introduction to mutual funds will help you make some decisions regarding your investments. There are literally thousands of different funds available, and brokerage houses often have their own set of funds that they create for sale to their customers. Talk to your broker and see if he or she can help you identify the best investment vehicle for you. Just make sure you review the fee structure of the mutual fund you are interested in before you invest.
Related Tags: mutual fund
Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make an HTML form
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are