| Mutual funds are good options for American | | | | Mutual fund shares can be purchased from the |
| investors to meet their financial goals. These | | | | company itself or a broker. There are secondary |
| funds offer professional management and | | | | market investors also, like the New York Stock |
| diversification of the funds invested. Mutual funds | | | | Exchange. Per share net asset value of the funds |
| assets in 1990-2000 rose from 1.065 trillion to a | | | | or NAV is the price that you pay for buying a |
| whooping 6.965 trillion dollars. 10% Americans | | | | mutual fund share. It also includes the shareholder |
| owned funds in 1980 and by 2000, the | | | | fee that is imposed by the fund, at time of |
| percentage increased to 49%. | | | | purchase. The best feature of mutual funds is |
| What are Mutual funds? | | | | that these shares are 'redeemable'. You, as an |
| A company dealing in mutual funds invests the | | | | investor, can sell your shares back to the broker. |
| money of several investors in bonds, stocks, | | | | In order to accommodate new investors, mutual |
| securities, assets and several other short-term | | | | fund companies generally create new shares and |
| money-market instruments. The combined | | | | sell them. They keep selling their shares |
| 'holdings' owned by the mutual fund are known as | | | | continuously till they become large. Investment |
| its portfolio. When you invest in a mutual fund you | | | | advisers act as separate entities and are |
| become a shareholder of the company. Each | | | | responsible for managing the investment portfolio |
| share in a mutual fund company is the | | | | of the mutual funds. Investing in mutual funds |
| representation of he investor's proportionate | | | | tends to lower the risk factor because they are |
| ownership of the fund holdings and the income | | | | the result of diverse investments. Since someone |
| generated. You earn dividends when the mutual | | | | else manages your investments, you need not |
| fund company earns a profit, however, your | | | | worry about keeping constant tabs on the |
| shares will decrease in value if it faces a loss. A | | | | investment, though a periodical check enhances |
| professional investment manager does the buying | | | | your personal book of accounts. Managing funds is |
| and selling of securities for the growth of the | | | | the full time job of the fund manager and he is |
| fund. | | | | responsible for the performance and health of the |
| Types of mutual funds: | | | | investment. |
| Equity funds: These funds involve only common | | | | The rate of returns in mutual funds is based on |
| stock investments. They can earn a lot of profit, | | | | the increase or decrease of the value, during a |
| but are also very risky. | | | | specific period. Returns of a fund indicate the |
| Fixed income funds: They include corporate and | | | | track record. It is important to remember that |
| government securities. These funds offer fixed | | | | the past performance cannot guarantee future |
| returns at a low risk. | | | | results. |
| Balanced funds: This is the combination of bonds | | | | As in the case of any investment or business, |
| and stocks with a low risk. However, the | | | | mutual funds also have risks associated with the |
| investment does not earn a lot through these | | | | returns. It is essential to set your financial goals |
| funds. | | | | and requirements, before investing in a mutual |
| How it works? | | | | fund. |