A-Z of personal finance: M is for mutual funds
Have you been thinking about investing in stocks but aren’t quite sure how to start? Perhaps you don’t have the time or know how to select your own stocks or do not have a very large amount of money to invest. Mutual Funds may be the ideal investment option for you.
A Mutual Fund is a portfolio that pools investors’ funds to purchase stocks, bonds, money market and other securities. When you invest in a mutual fund, you own a piece of the total portfolio of securities. The portfolio is then managed by a professional fund manager who handles everything from the day to day management of the fund including research, selection and monitoring of the performance of the fund and its underlying investments.
There are several different mutual funds to choose from. Some invest purely in stocks, some in bonds, whilst others invest in short term money market securities; balanced funds invest in combinations of these categories.
Mutual funds usually set relatively low minimum amounts for initial and subsequent subscriptions. This makes it an ideal investment product for smaller investors who do not have a lump sum to invest but prefer to set aside funds periodically for long-term savings.
Investing without proper knowledge is one of the worst investment mistakes. Every mutual fund publishes a prospectus which is a legal document that provides a great deal of information that you need to know and understand, such as the fund’s investment objective and style, and its fees.
Always review a fund’s prospectus before committing your funds. Most mutual funds provide on line access, which makes it easy for you to monitor your investment. Fund bid and offer prices are also quoted in the dailies.
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