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A mutual fund is a company that buys securities, which are stocks, bonds, money markets, etc. The company employs professional fund advisers that spend their days buying and selling the securities that will make them and their clients money. That is where you come in. When you buy a share of a mutual fund, you are buying a share of that company whose sole business is to buy and sell securities itself. While mutual funds do have fees, they are less than what you would pay if you were to buy and sell individual stocks.
Mutual Funds Make Investing Convenient
If you watch any business shows, read through the investment section of a paper or try to scan some investment articles online, you’ll see that everyone says you need to diversify. Diversification is key, it’s vital, it’s imperative. But, they never really tell you how to do it. In fact, when you know what it really is to diversify, you’ll end up with a really big stack of charts and an even bigger headache.
Mutual Funds Make Diversification Automatic
Diversification means that you should never have all of your money in one security. When you begin to invest, you start out with cash. That cash sits until you buy shares of common stock, mutual fund shares, bonds, etc. To diversify, you should disperse that money across all types of securities, in different sectors and with different growth objectives. Diversifying your money reduces the volatility of your portfolio, and if one company you own shares of tanks, you have other shares in other companies that remain stable.
Mutual Funds are Managed by Professional Advisers
Managing a portfolio and keeping it diversified is a full time job, and this is a major benefit of mutual funds. A fund adviser’s only goal is to make money for themselves and for you! Investing in a mutual fund is as easy as opening a bank account. You can even use a fund the way you would a checking account with check writing and ATM privileges. Mutual fund companies are the best ways to go for a novice investor who is just starting out.
Mutual Funds are Perfect for New Investors
Leaving things to the professionals is a quickfire way to get started in investing and is the best option for new investors. Mutual funds are also perfect for the passive investor that wants the benefits of diversification, low fees and convenience of having someone else manage their money for them.
Mutual funds are great investments. The trick is to be in the best no load funds.