| A mutual fund is also known as an open-end | | | | to choose mutual funds over other investments |
| fund and is an investment company that | | | | such as bonds and stocks. |
| spreads its money across a diversified | | | | |
| portfolio of securities- including stocks, | | | | Diversity can both increase and decrease your |
| bonds or money market instruments. | | | | potential returns and decrease your overall |
| | | | risk. Mutual funds allow an investor to |
| Shareholders who invest in a fund each own a | | | | spread out his or her money across a few as a |
| representative portion of those investments, | | | | handful to as many as several thousand |
| less any expenses charged by the fund. | | | | companies at one time. |
| | | | |
| Advantages of Investing in Mutual Funds | | | | Funds can be beneficial for small investors |
| | | | who would be forced to pay enormous |
| 1. Professional Management | | | | transaction fees if they bought the |
| | | | securities individually and for people who |
| 2. Liquidity | | | | don't have time to research their own |
| | | | investments or who don't trust their own |
| 3. Explicit investment goals | | | | investment expertise. |
| | | | |
| 4. Simple reinvestment programs | | | | Mutual funds are not necessarily low cost |
| | | | investments. Many of them charge one time |
| 5. Investment diversification. | | | | "load fees" to new purchasers. |
| | | | |
| Disadvantages of Investing in Mutual Funds | | | | Types of Mutual Funds: |
| | | | |
| 1. Mutual funds cannot be bought or sold | | | | 1. Closed End Mutual Funds: |
| during regular trading hours, but instead are | | | | |
| priced just once per day. | | | | These funds issue a fixed number of shares to |
| | | | the investing public and usually trade on the |
| 2. Many funds charge hefty fees, leading to | | | | major exchanges just like corporate stocks. |
| lower overall returns. | | | | |
| | | | 2. Open End Mutual Funds: |
| 3. Overtime, statistics reveal that most | | | | |
| actively managed funds tend to under perform | | | | These funds stand ready to issue and redeem |
| their benchmark averages. | | | | shares on a continuous basis. Shareholders |
| | | | buy the shares at the net asset value and can |
| Mutual fund investors make money either by | | | | redeem them at the current market price. |
| receiving dividends and interest from their | | | | |
| investment, or by the rise n value of the | | | | 3. Load Funds: |
| securities. Dividends interest and profits | | | | |
| from the sale of any securities (capital | | | | Load funds refer to sales charge paid by an |
| gains) are passed on to the shareholders in | | | | investor who purchases shares in a mutual |
| the form of distributions. And shareholders | | | | fund. When sales charge is imposed at the |
| generally are allowed to sell (redeem) their | | | | time of purchase, it is known as a front-end |
| shares at any time for the closing market | | | | load. Back end loads represent charges that |
| price of the fund on that day. | | | | are assessed when the investor sells the |
| | | | fund. |
| Reasons to Invest in Mutual Funds: | | | | |
| | | | 4. |
| There are various reasons for the investors | | | | |