Global online B2B marketplace : http://www.bytrade.com
Basic Function
Mutual funds are pools of investment properties that a fund manager buys and sells for investors who buy shares of the fund. By purchasing shares in a mutual fund, you're buying a portion of whichever investments the fund contains, and the properties you own, as well as their value, are always subject to change. Mutual funds can include stock, bonds and other securities. Some mutual funds focus on a specific type of company or industry while others invest broadly across the entire market as the fund manager sees fit. Mutual funds also take different levels of risk, depending on how soon the investors expect profits and how aggressively they want to invest their money. It's essential to examine a mutual fund's track record before buying since there are so many types of mutual funds to choose from.
Advantages
One of the key advantages of investing in a mutual fund is that it distributes the risk of investing. As a private individual, you could never afford shares in all of the companies that a mutual fund holds. But as an owner of shares in the fund, you can earn a profit when any of those companies increase their share prices. If one company loses value, it's more likely to be offset by other investments in the fund, so you endure a smaller loss than if you owned stock in the company exclusively. You also don't need to make any investment decisions except for when to buy more shares in the fund or sell your shares, as the fund manager handles day-to-day transactions for all fund owners.
Drawbacks
Mutual funds still carry a certain degree of risk. If a mutual fund invests solely in a single industry, your shares will lose significant value if the industry experiences broad losses or falls out of favor with investors. You also hand over control of your money to fund investors who, according to the U.S. Securities and Exchange Commission, can rarely outperform average market growth rates. Finally, mutual funds charge fees whenever you buy or sell shares, which can reduce your profits, especially if you buy and sell often.
Considerations
The value of a mutual fund depends heavily on which fund you buy into and how long you hold your shares. A short period of ownership will mean that fees eliminate a larger percentage of your gains. At the same time, holding a fund for an extended period of time will give you more time to recover from losses as stock and bond markets move through cycles toward overall growth.
Mutual funds also give you an opportunity to have a say in where you invest. For example, if you feel strongly that the tech industry is poised for growth you can select a mutual fund devoted to tech stocks. If you have a passion for environmentally responsible businesses, you can select a "green" mutual fund that only buys shares in businesses with strong environmental records.
没有评论:
发表评论