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