A lot of people start to jump into the mutual fund investment game. While mutual funds have shown themselves over time to be a safer bet than regular stock trading, But there is always the chance you could lose in your investment. But the type of fund you choose will have a lot to do with the amount of risk you take on and the kind of return you’re looking for. For starters, mutual funds are usually broken down into six main categories.
1) Equity mutual funds allow you to invest in typical shares of common, everyday stock.
2) Fixed income mutual funds allow you to invest in corporate or government securities that usually offer a set rate of return on your investment.
3) Balanced mutual funds allow the investor to take on a fund that includes both stock and bond options.
As far I know the safest form of mutual funds are known as money market mutual funds. They offer a high degree of stability for your principal, as well as high liquidity if you need to back out.
Bond mutual funds are popular since they invest in tax free as well as taxable ones.
And finally, sector funds are used to help diversify your holdings within a particular industry.
Each of these types of funds can be both aggressive and risky with a high level of reward possible, or they can be safer and lower risk. It all depends on which fund you choose.
To break things down further, equity funds are usually divided up into four different categories: Growth and Income mutual funds, International mutual funds, growth mutual funds and aggressive growth mutual funds. Each different type of fund has a particular goal in mind. For some, it’s to aggressively pursue income, even in risky situations, while others seek to preserve the initial investment and only take smaller chances.
As we can see, the mutual fund landscape is filled with so many options, it can make a green horn head spin. But fear not, there is almost limitless information available on which mutual fund is right for your particular investment strategy. Not only do most mutual funds and those that run them have their own website, there is endless advice as to which fund is right for you on the Internet, as well. Don’t forget to utilize publications like the Wall Street Journal, as well as friends and family who might have had particular luck with a specific fund. Welcome to mutual fund investing!
Showing posts with label mutual fund. Show all posts
Showing posts with label mutual fund. Show all posts
Saturday, January 10, 2009
Friday, January 2, 2009
Criticism about mutual funds
Mutual fund investing has exploded over the past 50 years to become one of the most popular forms of investing anywhere, there are still possible pitfalls that you can fall into if you’re not careful. Investing is still a risky business, even if everyone is doing it. Here are some tips to help you through any problems you might have.
One common criticism about mutual fund investing is that they don’t have a high enough return on their investment and that index funds, which aren’t as popular have historically returned a higher investment than the much more popular actively managed mutual funds.
Second common problem that some have with mutual fund investing is the use of load funds. You have probably seen the phrase “no-load mutual fund” in the newspaper or on television. The reason the no-load type of fund is preferred is because load funds come loaded with fees. These fees can run anywhere between half a percent, all the way up to 8.5 percent of however much you chose to invest. It’s thought that these fees are a clear conflict of interest as they clearly benefit the people making the sale and hurt the person making the investment. Load mutual funds are also thought to make your broker recommend funds that will maximize his fee, and not your investment portfolio.
Some investors also point to a perceived conflict of interest in regards to the size of the mutual fund. Most companies that manage the mutual fund charge a fee of between half a percent up to two and a half percent of the total amount of the funds assets. It’s thought that this fee could cause a fund to spend more on advertising than is actually needed so that they can get more people to invest in the fund and maximize their fee as much as possible.
The mutual fund market isn’t immune to scandals, either. In 2003, a scandal involving the practice of unethical and dishonest trading practices. Many funds were found to have participated in late trading and market trimming, both of which are illegal practices. You obviously don’t want to invest in a mutual fund that is engaged in illegal activities.
Mutual fund investing is gaining in popularity on an almost weekly basis, and a few bad eggs in the business won’t ruin it for everyone. However, it is always good advice to enter into any kind of investing with your eyes open, and if you feel your mutual fund is behaving improperly, there are authorities you can report them to.
One common criticism about mutual fund investing is that they don’t have a high enough return on their investment and that index funds, which aren’t as popular have historically returned a higher investment than the much more popular actively managed mutual funds.
Second common problem that some have with mutual fund investing is the use of load funds. You have probably seen the phrase “no-load mutual fund” in the newspaper or on television. The reason the no-load type of fund is preferred is because load funds come loaded with fees. These fees can run anywhere between half a percent, all the way up to 8.5 percent of however much you chose to invest. It’s thought that these fees are a clear conflict of interest as they clearly benefit the people making the sale and hurt the person making the investment. Load mutual funds are also thought to make your broker recommend funds that will maximize his fee, and not your investment portfolio.
Some investors also point to a perceived conflict of interest in regards to the size of the mutual fund. Most companies that manage the mutual fund charge a fee of between half a percent up to two and a half percent of the total amount of the funds assets. It’s thought that this fee could cause a fund to spend more on advertising than is actually needed so that they can get more people to invest in the fund and maximize their fee as much as possible.
The mutual fund market isn’t immune to scandals, either. In 2003, a scandal involving the practice of unethical and dishonest trading practices. Many funds were found to have participated in late trading and market trimming, both of which are illegal practices. You obviously don’t want to invest in a mutual fund that is engaged in illegal activities.
Mutual fund investing is gaining in popularity on an almost weekly basis, and a few bad eggs in the business won’t ruin it for everyone. However, it is always good advice to enter into any kind of investing with your eyes open, and if you feel your mutual fund is behaving improperly, there are authorities you can report them to.
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