| 1. You get full-time, professional money
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| | the investing job done. Research and
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| management. Most people do not have the
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| | operating costs are shared by the
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| time or skill to select and monitor
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| | thousands of shareholders. The most
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| individual stocks and bonds.
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| | efficiently run funds have an expense
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| 2. You get reduced risk through
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| | ratio (the percentage of fund assets
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| diversification because a mutual fund
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| | deducted for management and operating
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| owns many stocks or bonds. You can also
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| | expenses) of less than 1% a year. Some
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| pick your level of market risk by
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| | well-established funds charge annual fees
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| choosing particular types of funds (e.g.,
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| | as low as 0.2% to 0.5%. Also, many funds
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| money market funds to insure your
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| | are sold directly through their sponsors
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| principal will not drop in value, bond
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| | with no sales charge-known as "no-load"
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| funds if you want current income and some
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| | funds. Funds that charge a sales
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| stability in your portfolio, stock funds
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| | commission are called "load" funds.
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| if you want your money to grow over the
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| | 7. Mutual funds are convenient. They can
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| long term.) 3. You will earn competitive
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| | be purchased (and sold) directly from a
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| returns on your investment. Mutual funds
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| | mutual fund company by mail and by
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| can furnish the kinds of returns you need
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| | telephone and from full-service brokers,
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| to reach your goals. In fact, by choosing
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| | financial planners, banks or insurance
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| an index fund, (a fund that invests in
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| | companies. (Important note: when mutual
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| securities of one of the broadly based
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| | funds are purchased from banks, they are
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| market indexes such as Standard and
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| | not insured by the FDIC like other bank
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| Poor’s 500), you can expect to match
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| | products.) In addition, some discount
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| the market’s performance, minus the
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| | brokers have established mutual fund
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| expenses of running the fund. This is an
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| | "supermarkets" where investors can own
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| assurance that no other investment can
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| | funds from many different fund families
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| provide.
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| | in one consolidated account without any
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| 4. You don’t need a lot of money to get
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| | sales charges or transaction fees.
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| started. Many funds require only $1,000
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| | Earnings from mutual funds can also be
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| to open an account, and some funds
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| | automatically reinvested in additional
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| require minimum initial investments as
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| | shares. Reinvesting and compounding are
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| low as $250 to $500. Subsequent deposits
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| | keys to building wealth.
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| can be as small as $25 to $100 if an
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| | 8. Automatic withdrawal plans are
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| automatic investment plan (AIP) is
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| | available, making it possible to have a
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| adopted. An AIP is an arrangement where
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| | steady stream of income for retirement
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| you agree to have money automatically
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| | (e.g., withdrawals of $250 per month).
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| withdrawn from your bank account on a
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| | 9. Mutual funds have less risk of
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| regular basis, (e.g., once a month or
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| | bankruptcy or fraud than many other
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| every quarter) and used to purchase fund
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| | securities because they are highly
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| shares.
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| | regulated by the federal government
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| 5. You retain ready access to your money.
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| | through the SEC, which is charged with
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| A mutual fund is required to buy back
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| | assuring that mutual funds and investment
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| your shares, which makes withdrawals
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| | advisors follow specific rules of
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| easy. It will mail your check within
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| | disclosure.
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| seven days of the request at the closing
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| | 10. Monitoring mutual funds is simple.
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| price (NAV) on the day it is received.
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| | Prices are reported daily in the
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| (An exception to receiving NAV at sale
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| | financial section of many newspapers and
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| time is back-end load funds that charge a
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| | more in-depth information is available in
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| redemption fee).
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| | the Sunday business sections
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| 6. Mutual funds are a cheaper way to get
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| |
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