| If you are considering investing your discretionary | | | | Advantages and Disadvantages |
| income in the stock market, you have likely heard | | | | Like any investment, there are several |
| the term "mutual fund." Below is an overview of | | | | advantages and disadvantages associated with |
| mutual fund investing. | | | | purchasing mutual funds. First, you generally won't |
| Investing is Risky | | | | see dramatic fluctuations in a typical fund - this is |
| No matter how "low risk" an investment claims to | | | | because they are largely selected for stability. |
| be, it is important that you understand all | | | | Of course, while mutual funds are generally not |
| investments carry some degree of risk. Even | | | | going to generate massive gains, some funds are |
| taking a posture of not investing at all is its own | | | | quite a bit more aggressive (and risky) than |
| form of "preservation investing." | | | | others. The risk associated with them you choose |
| With that in mind, mutual funds historically to have | | | | is completely dependent on the level of risk you |
| much lower risks than many other investment | | | | are willing to take with your cash. |
| options - an attribute that makes them particularly | | | | Diversify your Portfolio |
| attractive to people who are new to investing or | | | | Mutual funds are a great way to help you |
| who simply want to get their feet wet in the | | | | diversify your portfolio - although the manner in |
| stock market while keeping their investments as | | | | which they are used depends on your financial |
| risk-free as possible. | | | | needs. If, for example, you have decades until |
| Beside being an ideal safety investment option, a | | | | your planned retirement, you might consider a |
| mutual fund can be a great alternative to a | | | | riskier fund because if it doesn't go well, you have |
| traditional savings account. | | | | many more years to recover before leaving the |
| This is because, in addition to their low degree of | | | | workforce. On the other hand, if you are only a |
| risk, they generally offer substantially better | | | | few years away from retirement, you should |
| return rates than a standard savings account - | | | | probably opt for more stable funds. |
| making them (usually) a great way to secure | | | | Types of Funds |
| your financial future. | | | | There are three basic types of mutual funds, with |
| Mutual Fund Basics | | | | a few variations on each. First are money market |
| In a nutshell, a mutual fund is simply a collection of | | | | funds, which are ideal for long term investors who |
| bonds and stocks owned by a group of people | | | | are willing to leave their funds in an interest |
| rather than a single investor. | | | | bearing account and allow it to accumulate. |
| Because of the way they are set up, these funds | | | | Next you have equity funds, which provide slow |
| allow investors to buy for a much lower | | | | growth over their life as well as some income |
| investment than it would cost them to purchase | | | | along the way. Finally, there are fixed income |
| an identical portfolio of investments on their own - | | | | funds, which designed to ensure the investor is |
| and it spreads potential losses among a group of | | | | able to maintain a current standard of living. |
| people should the fund go south. | | | | |