What is a mutual fund ?
Have some examples ?
- PIMCO Total Return
- Vanguard Total Stock Market Index Fund
- American Funds Growth Fund of America
Investors pull in money to form a mutual fund, and its managers invest the money to attain a certain goal.
Mutual fund shares are "redeemable." Redeemable shares means that investors must, in a certain point in the future, buy the money back from the investors.
What is the frequency ?
The selling frequency depends on the goal of the fund.
Who manages mutual funds ?
The investment portfolios of mutual funds typically are managed by separate entities known as "investment advisers" that are registered with the SEC. Trustees can ensure that investor's interests are safe.
What are the types of mutual funds ?
There are countless types of mutual funds : open-ended, debt/income, liquidity, growth, close-ended, etc.
Different mutual funds may also be subject to different risks, volatility, and fees and expenses, which are an important factor that investors should consider.
What should I consider first ?
It depends on your goals and capital. Nevertheless, the usual " do not put all the eggs in one basket " is wise. Each year, you should look at your mix of funds to make sure they still dovetail with your strategy of diversification.
Are there some known strategies ?
Different mutual funds may also be subject to different risks, volatility, and fees and expenses, which are an important factor that investors should consider.
What should I consider first ?
- Goals and risk tolerance
- Charges and fees
- Evaluating managers and past results
It depends on your goals and capital. Nevertheless, the usual " do not put all the eggs in one basket " is wise. Each year, you should look at your mix of funds to make sure they still dovetail with your strategy of diversification.
Are there some known strategies ?
- Index funds : These funds are built to replicate the performance of they relevant market, so they should track that market's index.
- Actively-managed funds : The portfolio managers research the vast investment universe and then pick and purchase things that match their investment strategies. They are trying to outperform certain indexes.
- Lifecycle funds : invest in a combination of stock and bond funds. The fund's allocation to its underlying investments change over time as you near retirement.
Image : © Kevin Dooley, CC BY 2.0.
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