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