In today’s volatile economy, many people who might have previously been interested in investing their money may have been frightened away. But there are options out there for those who are willing to let their investment ride over the long term: the most reliable of these options is the mutual fund.
In a nutshell, a mutual fund is a collection of stocks, bonds, and money market securities that have been put together in a bundle that is offered as one to investors. The criteria for the selection within that bundle are the past performances of its individual participants and the ultimate goal of the fund. Because the success of the mutual fund does not rest on the performance of any single one of its components, it is a more reliable means of investing over the long term than investing in individual stocks.
The downside of mutual fund investing, if there is one that merits pointing out, is that it is definitely meant to be a long term commitment. The stock markets can bring a return on investment of 10-12 %, even over a relatively short amount of time, whereas mutual funds will grow 8 – 9% a year.
Investors who are interested in making day trades or only want to stay in the market for short amounts of time will not be good candidates for mutual fund investing. However, because of their inherent diversity, mutual funds are steadier over the long term and will attract more conservative folks who are willing to be patient and wait longer for their rewards.
There are different types of mutual funds available on the market today, and a good professional investment manager can help you select what may be right for your individual needs.
— Bond mutual funds are made up of strictly bond components; these bonds may come from a variety of sources including federal, public company, or state government. Bonds are a steady type of investment since they are not as subject to the volatility of the stock market.
— Stock, or Equity funds are comprised entirely of stock offerings. Because it depends solely on stock market activity, it is entirely subject to the ups and downs that happen on Wall Street. However, the long term prospects of greater return on investment are better.
Whatever type you think you may want to go with, you should always check out a fund’s “prospectus.” The prospectus gives information about the fund’s components, its past performance, its goals, any fees associated with it, risks, who is managing it, and all other facets concerning it. Because the prospectus is a legal document, the investor can be assured of the validity and correctness of its contents.
If you are new to investing and need solid advice, make sure to consult with a professional investment manager who can help you make good decisions. It’s your money: use it wisely.
Article Source: Articles Engine
If you want more information about long term mutual fund investing, contact the seasoned professionals at Fenimore Asset Management, Inc (http://www.famfunds.com). Art Gib is a freelance writer.