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Understanding Mutual Funds

Mutual Fund Companies

Keep it simple. One of the simplest investment instruments available to a new investor is a mutual fund. A mutual fund is a professionally managed pool of money invested by people like you. There are many different types of mutual funds, each designed for a different type of investor with a different financial profile. When you buy a mutual fund, you are pooling your money with other investors who share your investment profile and your objectives.

There is strength in numbers. By pooling your money with other investors who have similar objectives, you can enjoy increased purchasing power and reduce your investment costs. Professional mutual fund managers trade securities at discounted institutional rates. Consequently, the savings they realize are passed along to you.

Keep your options open. A key benefit of mutual fund ownership is diversification. The range of security types and asset classes offered in mutual funds helps to shield your investments from market fluctuations. If the value of one security held in a fund falls, the loss may well be offset by a rise in the price of another security. By investing in a variety of asset classes, you can profit from the growth of one type of security, while shielding your portfolio from potential losses in another. Whether it is by security, company, industry, or country, mutual funds offer investors a level of diversification that would be difficult to achieve on their own.

Mutual funds come in a variety of shapes and sizes. The most familiar mutual funds are bond or fixed-income funds, money market funds, equity funds, and balanced funds. Bond funds offer investors the benefits of steady interest income and the opportunity to realize capital gains over the long term. For the interim investor, money market funds provide the chance to insulate capital while receiving returns superior to those offered by a bank savings account. A basic equity fund invests in the shares of various corporations. Equity funds differ in their selections of individual company characteristics, industries, or geographic locations. Finally, balanced funds exist for those investors who want the benefits and convenience of owning bonds, money market instruments, and equities in one mutual fund.

Do you need fast cash? Mutual funds are structured in such a way that accessing your money is as simple as calling your financial advisor. As your investment needs change, your personal financial plan can also be easily changed. Your financial advisor can move money from one fund to another or cash in all, or part, of your investment at any time. To help build assets over the long term, you can institute a plan of regular investment contributions.

Invest with the best. Mutual funds give every investor the advantage of continual professional money management. These professionals have access to some of the best quality investment research in the world. Professional money managers monitor both domestic and foreign markets around the clock. The knowledge and experience of these professionals ensures that your investments will keep pace with today's ever-changing markets


When selecting a mutual fund, remember to choose a fund that matches your personal objectives. Look for consistency in the long-term performance of the fund and the professional who manages it. Try to select a mutual fund that invests in securities you understand and that has a portfolio manager whose style you are comfortable with. Your financial advisor, who has reviewed your unique investment objectives and understands your concerns is positioned to provide you with information on mutual funds and help you select a fund that adds value to your portfolio.

Mutual funds are an excellent way to protect and build your capital. As you go through life, your financial goals change, and so too should your portfolio. Your financial advisor is there to monitor your investments and help you modify your portfolio on a regular basis to ensure long-term, consistent growth.

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Doug Hudson