How To Invest Money In Mutual Funds
Need to know how to invest money in mutual funds? A mutual fund is an investment option in which money from thousands of small investors is pooled together by a fund manager or team, to buy stocks, bonds or other securities. When you invest in a fund, you receive a stake in all its investments. Most funds allow you to begin investing with only a few thousand dollars and you can attain a diversified portfolio with much less than if you bought individual stocks and bonds. When you invest money in Mutual Funds you don't have to be concerned with tracking your holdings yourself since that's the job of the fund manager. It's considered a form of passive investing.
- Determine your risk tolerance. Determine how much you're willing to invest and the kind of return you're looking for. You should consider using a financial advisor who will be able to guide you, or you can DIY by investing with any number of mutual fund companies.
- Select a fund that's best for you. For capital appreciation, you should consider funds that invest in equities, or stock. Compare mutual funds that invest in commodities such as gold or oil. If you would like a more conservative investment, look into bond funds which can produce a steady income, but with a lesser return.
- Look at the track record. The way to choose a mutual fund is to look at its performance or track record. How has it performed during good and bad years? But keep in mind, past performance is not indicative of future results. However, it can show a funds holdings are consistent with the objectives of the fund.
- Learn the difference between funds. There are no-load funds and there are load funds. A no-load fund a fund which charges no sales, management or commission fees. No-load funds are very popular and provide a more affordable investment option. A load fund can have a commission or fee that is charged on an annual basis. Load funds are usually purchased through a financial advisor, but can also be purchased directly through the fund. One fund is not necessarily better than the other.
- Three ways to invest. After you've compared mutual funds, there are three ways to invest money in mutual funds. You can select a financial advisor (see resources) and open an account with his or her investment firm. You can go it alone and invest on-line by opening an account with an on-line brokerage firm. Your third option is to invest directly with a mutual fund company by going directly to their website.