Many investors’ $$$ are pooled together and managed by a professional investment company.
This offers an investor broad diversification. The investor is not buying just one stock but is buying hundreds of different stocks, or hundreds of different Bonds.
The investor has control of what type of investment the mutual fund manager can buy. If the fund were a Bond fund the manager may only buy Bonds of a certain quality or in a certain area. If the fund were a stock fund the manager may only invest in stocks of a certain size, quality, rating, or location.
The really neat thing about a fund is that you can compare one fund manager to another thereby consistently picking the managers that have performed the best.
Typically small amounts of money can be invested in a Mutual Fund, $100 per month or less. This is not typically cost effective with stock.
Many types of Funds are available: Stocks, Bonds, Gold, Aggressive, Conservative.
There is a Fund for every Investor.
How a Mutual Fund Works:
You choose the Fund or Funds that are right for your style of investing.
Each Fund is different and the Fund Manager must follow strict rules that are defined in the prospectus when choosing how the money is invested.
Growth Fund
Managed Fund
International Fund
Money Market Fund
Social Awareness Fund
Sector Fund Bond Fund
Growth Fund
Stocks only, no dividends.
A growth fund invests in companies that are focused on growth plowing profits back into research and discovery or advertising. These companies do not pay dividends, hence your investments growth is a result of appreciation.
Managed Fund
Bonds, Money Market, and Stocks these do produce dividends.
A managed funds primary objective is gain through dividends, bond income, and stock appreciation this fund will tend to take less risk.
Bond Fund
A Bond Fund that only invested in Bonds and money market instruments.
International Fund
Is a fund invested in Stock or Bonds overseas.
Money Market Fund
Money Market instruments are primarily short term debt instruments, primarily 90 days to one year maturity’s. Money Market funds are not FDIC insured. Although they are the most stable of any mutual fund almost always returning a positive return.
Social Awareness Fund
Social Awarness Fund typically does not invest in stocks of companies that invest in Liquor, Tobacco, Gambling, Nuclear Power, or Oil companies.
Sector Fund
A sector fund is a fund that invests in a particular industry or company type, such as semiconductor companies, or electronics, or home mortgages. This type of fund is typically much more susceptible to risk but can also give tremendous gain if that industry or sector is aggressively expanding.